Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/105891 
Year of Publication: 
2007
Series/Report no.: 
IMK Working Paper No. 9/2007
Publisher: 
Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK), Düsseldorf
Abstract: 
Contrary to the assumption of perfectly flexible labour markets commonly used in mainstream macroeconomic models, in the real world the existence of structural imperfections such as search and trading costs hinder the frictionless functioning of these markets, generally leading to outcomes of Non-Walrasian type with involuntary unemployment and open vacancies in "equilibrium". In this paper the author models the existence of labour market frictions into a Keynesian (Disequilibrium) AS-AD framework in the line of Asada, Chen, Chiarella and Flaschel (2006) through a labour search and matching function. By means of dynamic shock simulations, the author finds that the extent of the labour market rigidity has a great importance for the dynamics not only of employment and output, but also of wage and price inflation, and consequently also for the conduction of monetary policy.
Subjects: 
Labour market frictions
staggered wage and price dynamics
(D)AS- AD
monetary policy
JEL: 
E31
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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