Inflation dynamics with labour market matching: assessing alternative specifications

Arbeitspapier

This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behaviour. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1053

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: business cycle ; Inflation Dynamics ; labour market ; real rigidities ; Inflation ; Lohnrigidität ; Arbeitsmarkt ; Arbeitsuche ; Unvollkommener Markt ; Neoklassische Synthese ; Theorie ; Eurozone ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Christoffel, Kai ; Costain, James ; de Walque, Gregory ; Kuester, Keith ; Linzert, Tobias ; Millard, Stephen ; Pierrard, Olivier
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/153487
• Last update: 10.03.2025, 11:42 AM CET