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SEARCH AND STOCHASTIC DYNAMICS IN THE OLD KEYNESIAN ECONOMICS: A RATIONALE FOR THE SHIMER PUZZLE
Author(s) -
Guerrazzi Marco
Publication year - 2011
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2011.04126.x
Subject(s) - economics , wage , volatility (finance) , new keynesian economics , profit (economics) , econometrics , productivity , microeconomics , macroeconomics , labour economics , monetary policy
Following Farmer's micro‐foundation of the General Theory , I build a competitive search model in which agents are divided in two categories, i.e. wage and profit earners. Within this framework, I show that the model economy has a continuum of equilibria that might be consistent with a certain degree of endogenous real stickiness. Moreover, calibrating and simulating the model in order to fit US first‐moment data, I show that this setting can provide a rationale for the Shimer puzzle, i.e. the relative stability of labor productivity in spite of the large volatility of labor market tightness.