Search with Wage Posting under Sticky Prices

33 Pages Posted: 7 Dec 2014 Last revised: 6 Oct 2020

See all articles by Andrew T. Foerster

Andrew T. Foerster

Federal Reserve Banks - Federal Reserve Bank of San Francisco

Jose Mustre-del-Rio

Federal Reserve Bank of Kansas City

Date Written: September 20, 2020

Abstract

This paper examines the implications of interacting pricing frictions, labor market frictions,
and consumption risk by comparing variants of a New Keynesian model. The model variants
make alternative assumptions about whether hiring and pricing decisions occur within the same
firm or across different firms, and whether workers pool income. Nonetheless, each model implies the same contract is offered to workers, making model comparisons transparent. The economy's response to changes in unemployment benefits or persistently below-target inflation depends on whether hiring and pricing decisions are integrated. Meanwhile, the dynamics following technology or monetary shocks are shaped both by firm- and worker-level assumptions.

Keywords: Search, Matching, Inflation, Sticky Prices, Heterogeneity, Incomplete markets

JEL Classification: E10, E30, E50, J60

Suggested Citation

Foerster, Andrew T. and Mustre-del-Rio, Jose, Search with Wage Posting under Sticky Prices (September 20, 2020). Federal Reserve Bank of Kansas City Working Paper No. 14-17, Available at SSRN: https://ssrn.com/abstract=2534565 or http://dx.doi.org/10.2139/ssrn.2534565

Andrew T. Foerster (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Jose Mustre-del-Rio

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

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