Arbeitspapier

The role of real wage rigidity and labor market frictions for unemployment and inflation dynamics

In this paper we incorporate a labor market with matching frictions and wage rigidities into the New Keynesian business cycle model. In particular, we analyze the effect of a monetary policy shock and investigate how labor market frictions affect the transmission process of monetary policy. The model allows real wage rigidities to interact with adjustments in employment and hours affecting inflation dynamics via marginal costs. We find that the response of unemployment and inflation to an interest rate innovation depends on the degree of wage rigidity. Generally, more rigid wages translate into more persistent movements of aggregate inflation. Moreover, the impact of a monetary policy shock on unemployment and inflation depends also on labor market fundamentals such as bargaining power and the flows in and out of employment.

Sprache
Englisch

Erschienen in
Series: ECB Working Paper ; No. 556

Klassifikation
Wirtschaft
Monetary Policy
Unemployment: Models, Duration, Incidence, and Job Search
Business Fluctuations; Cycles
Price Level; Inflation; Deflation
Thema
Inflation persistence
Labor Market Search
Matching Models
monetary policy
Real Wage Rigidity
Lohnrigidität
Reallohn
Arbeitsmarkt
Geldpolitik
Geldpolitische Transmission
Neoklassische Synthese
Theorie
Matching

Ereignis
Geistige Schöpfung
(wer)
Christoffel, Kai
Linzert, Tobias
Ereignis
Veröffentlichung
(wer)
European Central Bank (ECB)
(wo)
Frankfurt a. M.
(wann)
2005

Handle
Letzte Aktualisierung
20.09.2024, 08:23 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Christoffel, Kai
  • Linzert, Tobias
  • European Central Bank (ECB)

Entstanden

  • 2005

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