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Title:The impact of labor markets on the transmission of monetary policy in an estimated DSGE model PDF Logo
Authors:Christoffel, Kai
Kuester, Keith
Linzert, Tobias
Issue Date:2005
Series/Report no.:IZA Discussion Papers 1902
Abstract:Real wages are a key determinant of marginal costs. The latter themselves are a driving force of inflation. We ask how wages and labor market shocks feed into the inflation process. We model search and matching frictions in the labour market in an otherwise standard New-Keynesian closed economy DSGE model. We estimate the model using Bayesian techniques for German data from the mid 70s to present. In our framework, we find that labor market structure is important for the evolution of the business cycle, and for monetary policy in particular. Yet labor market shocks are not important information for the conduct of stabilization policy.
Subjects:labor market
wage rigidity
bargaining
Bayesian estimation
JEL:E52
E58
J64
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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