2003•Unpublished venueRequires access

Labor Market Dynamics in a Monetary Business Cycle Model with Search Frictions ∗

Michael U. Krause, Thomas A. Lubik

Abstract

We explore the role of real wage dynamics in a New Keynesian business cycle model with search and matching frictions in the labor market. Both job creation and destruction are endogenous. We show that the model generates counterfactual real wage and labor market dynamics. In particular, it fails to generate a Beveridge curve. That is, vacancies and unemployment are positively correlated. Introducing real wage rigidity leads to a negative correlation, and increases the magnitude of labor market flows to more realistic values. JEL CLASSIFICATION: KEYWORDS:

About this research paper

What this paper is about

Why it matters

A significance statement is not available in the OpenAlex record.

Key contribution

A contribution statement is not available in the OpenAlex record.

Method / approach

Method details are not available in the OpenAlex metadata.

Main findings

Findings are not separately available in the OpenAlex metadata.

Limitations

Limitations are not available in the OpenAlex metadata.

Applications

Application details are not available in the OpenAlex metadata.

Available abstract

Key concepts: Business cycle, Economics, New Keynesian economics, Counterfactual thinking, Unemployment, Beveridge curve, Wage, Matching (statistics)