Kiel Working Papers, Kiel Institute for World Economics
No 1561:
Capital, Endogenous Separations, and the Business Cycle
Björn van Roye and Dennis Wesselbaum
Abstract: We implement capital in an endogenous separations New
Keynesian matching model. In contrast to the vintage capital theory, we
suggest a more general approach, such that workers have unrestricted access
to a proportional share of the capital stock. We find that the introduction
of capital generates an important channel for the transmission of aggregate
productivity shocks, using capital-labor trade-off. The model generates
higher volatilities of key variables and therefore enhances the performance
of the matching model to generate stylized facts in response to an
aggregate productivity shock. However, there is almost no difference for
monetary policy shocks
Keywords: Capital, Endogenous Separations, Search and Matching; (follow links to similar papers)
JEL-Codes: E22,; E32,; J64; (follow links to similar papers)
25 pages, October 2009
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