Wage Stickiness and Unemployment Fluctuations: An Alternative Approach

• Autores: Miguel Casares Polo, Antonio Moreno, Jesús Vázquez
• Localización: Working Papers ( Universidad de Navarra. Facultad de Ciencias Económicas y Empresariales ), Nº. 4, 2009
• Idioma: inglés
• Enlaces
  • Texto completo
• Resumen

  • Erceg, Henderson and Levin (2000, Journal of Monetary Economics) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using Bayesian econometric techniques, both models are estimated with U.S. quarterly data of the Great Moderation. Estimation results are similar and provide a good empirical fit, with the crucial difference that our proposal delivers unemployment fluctuations. Thus, second-moment statistics of U.S. unemployment are replicated reasonably well in our proposed New-Keynesian model with sticky wages. In the welfare analysis, the cost of cyclical fluctuations during the Great Moderation is estimated at 0.60% of steady-state consumption.