Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/32953 
Year of Publication: 
2010
Series/Report no.: 
CEPR Discussion Paper Series No. 7650
Publisher: 
Centre for Economic Policy Research (CEPR), London
Abstract: 
In this paper we propose a novel way to model the labor market in the context of a New-Keynesian general equilibrium model; incorporating labor market frictions in the form of hiring and firing costs. We show that such a model is able to replicate many important stylized facts of the business cycle. The reactions to monetary and real shocks become much more sluggish. Job creation and job destruction are negatively correlated. And the volatility of unemployment is much larger than in the standard search and matching model.
Subjects: 
Business Cycle Statistics
Hiring and Firing Costs
Labor Market
Monetary Persistence
JEL: 
E24
E32
E52
J23
Document Type: 
Working Paper

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