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Equilibrium Unemployment, Job Flows, and Inflation Dynamics
Author(s) -
TRIGARI ANTONELLA
Publication year - 2009
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2008.00185.x
Subject(s) - economics , unemployment , inflation (cosmology) , general equilibrium theory , monetary policy , shock (circulatory) , phillips curve , order (exchange) , econometrics , keynesian economics , macroeconomics , monetary economics , medicine , physics , finance , theoretical physics
In order to explain the joint fluctuations of output, inflation and the labor market, this paper develops and estimates a general equilibrium model that integrates a theory of equilibrium unemployment into a monetary model with nominal price rigidities. The estimated model accounts for the responses of employment, hours per worker, job creation, and job destruction to a monetary policy shock. Moreover, search frictions in the labor market generate a lower elasticity of marginal costs with respect to output. This helps to explain the sluggishness of inflation and the persistence of output that are observed in the data.