Results 1  10
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19
Unemployment in an estimated new keynesian model. NBER Working Papers
, 2011
"... We reformulate the SmetsWouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of identification ..."
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Cited by 47 (6 self)
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We reformulate the SmetsWouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of identification of wage markup and labor supply shocks highlighted by Chari, Kehoe and McGrattan (2008) in their criticism of New Keynesian models, and allows us to estimate a "correct " measure of the output gap. In addition, the estimated model can be used to analyze the sources of unemployment fluctuations. JEL Classification: D58, E24, E31, E32.
Unemployment Fluctuations and Stabilization Policies: A New Keynesian Perspective
, 2010
"... I develop a version of the standard New Keynesian model for which a concept of unemployment can be defined. The resulting framework is shown to account reasonably well for the observed properties of unemployment fluctuations. That framework is also used to construct unemploymentbased measures of th ..."
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Cited by 19 (4 self)
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I develop a version of the standard New Keynesian model for which a concept of unemployment can be defined. The resulting framework is shown to account reasonably well for the observed properties of unemployment fluctuations. That framework is also used to construct unemploymentbased measures of the output gap, which are compared with more conventional measures. Finally, I study the gains from having the central bank respond systematically to the unemployment rate, in addition to other variables.
Optimal Monetary Stabilization Policy
 Handbook of Monetary Economics
"... 1 Optimal Policy in a Canonical New Keynesian Model............ 3 ..."
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Cited by 17 (5 self)
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1 Optimal Policy in a Canonical New Keynesian Model............ 3
Precautionary Saving and Aggregate Demand
, 2015
"... Abstract How do fluctuations in households' precautionary wealth contribute to the propagation of aggregate shocks? In this paper, we attempt to answer this question by formulating and estimating a tractable structural macroeconometric model of the business cycle with nominal frictions, unempl ..."
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Cited by 2 (0 self)
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Abstract How do fluctuations in households' precautionary wealth contribute to the propagation of aggregate shocks? In this paper, we attempt to answer this question by formulating and estimating a tractable structural macroeconometric model of the business cycle with nominal frictions, unemployment and incomplete insurance against unemployment risk. We argue that, under those frictions, timevariations in precautionary wealth have two conflicting effects on output volatility: a stabilizing "aggregate supply" effect working through the supply of capital and potential output; and a destabilizing "aggregate demand effect" working through aggregate consumption and the output gap. We quantify these forces via a maximumlikelihood estimation of the structural parameters of the model, using as observables both aggregate and crosssectional information (such as the extent of consumption insurance and the distributions of wealth and consumption across households). We find the impact of demand shocks on aggregates to be signficantly altered by timevarying precautionary saving.
Quantity Rationing of Credit and the Phillips Curve
 Journal of Macroeconomics
"... Quantity rationing of credit, when some firms are denied loans, has macroeconomic effects not fully captured by measures of borrowing costs. This paper develops a monetary DSGE model with quantity rationing and derives a Phillips Curve relation where inflation dynamics depend on excess unemployment, ..."
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Cited by 1 (0 self)
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Quantity rationing of credit, when some firms are denied loans, has macroeconomic effects not fully captured by measures of borrowing costs. This paper develops a monetary DSGE model with quantity rationing and derives a Phillips Curve relation where inflation dynamics depend on excess unemployment, a risk premium and the fraction of firms receiving financing. Excess unemployment is defined as that which arises from disruptions in credit flows. GMM estimates using data from a survey of bank managers confirms the importance of these variables for inflation dynamics.
Aggregate Demand, Idle Time, and Unemployment
, 2014
"... This paper develops a model of unemployment fluctuations. The model keeps the architecture of the Barro and Grossman (1971) general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework. On the product and labor markets, both price an ..."
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Cited by 1 (0 self)
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This paper develops a model of unemployment fluctuations. The model keeps the architecture of the Barro and Grossman (1971) general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework. On the product and labor markets, both price and tightness adjust to equalize supply and demand. There is one more variable than equilibrium condition on each market, so we consider various price mechanisms to close the model, from completely flexible to completely rigid. With some price rigidity, aggregate demand influences unemployment through a simple mechanism: higher aggregate demand raises the probability that firms find customers, which reduces idle time for firms ’ employees and thus increases labor demand, which in turn reduces unemployment. We use the comparativestatistics predictions of the model together with empirical measures of quantities and tightnesses to reexamine the origins of labor market fluctuations. We conclude that (1) price and real wage are not fully flexible because product and labor market tightness fluctuate significantly; (2) fluctuations are mostly caused by labor demand and not labor supply shocks because employment is positively correlated with labor market tightness; and (3) labor demand shocks mostly reflect aggregate demand and not technology shocks because output is positively correlated with
No. 153 Designing a Simple Loss Function for the Fed: Does the Dual Mandate Make Sense?
"... Yes, it makes a lot of sense. Using the Smets and Wouters (2007) model of the U.S. economy, we find that the role of the output gap should be equal to or even more important than that of inflation when designing a simple loss function to represent household welfare. Moreover, we document that a loss ..."
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Yes, it makes a lot of sense. Using the Smets and Wouters (2007) model of the U.S. economy, we find that the role of the output gap should be equal to or even more important than that of inflation when designing a simple loss function to represent household welfare. Moreover, we document that a loss function with nominal wage inflation and the hours gap provides an even better approximation of the true welfare function than a standard objective function based on inflation and the output gap. Our results hold up when we introduce interest rate smoothing in the simple mandate to capture the observed gradualism in policy behavior and to ensure that the probability of the federal funds rate hitting the zero lower bound is negligible.
Federal Reserve Bank of Boston
"... Designing a simple loss function for the fed: Does the dual mandate make sense?, Working ..."
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Designing a simple loss function for the fed: Does the dual mandate make sense?, Working
Referee
, 2014
"... essays on labor market volatility, monetary policy and real wage stickiness ..."
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essays on labor market volatility, monetary policy and real wage stickiness