Kiel Working Papers, Kiel Institute for World Economics
No 1496:
What Can a New Keynesian Labor Matching Model Match?
Christopher Reicher
Abstract: A labor matching model with nominal rigidities can match
short-run movements in labor’s share with some success. However, it cannot
explain much of the behavior of employment, vacancies, and job flows in
postwar US data without resorting to additional shocks beyond monetary
policy and productivity shocks. In particular, the model suggests that
monetary policy shocks can account for only a small portion of postwar
fluctuations, except for the Volcker and late-1940s episodes. Productivity
shocks can account for some of the pattern in labor’s share and in
employment between the late 1960s and the early 1980s. Based on the timing
of observed fluctuations in interest rates, inflation, and productivity, it
appears that the vast majority of observed fluctuations in the real economy
remain unexplained by standard real and nominal shocks
Keywords: Unemployment, labor market search, job flows, labor share, inflation, productivity shocks, monetary shocks; (follow links to similar papers)
JEL-Codes: E24,; E32,; E52,; J64; (follow links to similar papers)
50 pages, February 2009
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