Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/81859 
Year of Publication: 
2012
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 238
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
Can a model with limited labor market insurance explain standard macro- and labor market data jointly? We seek to construct a monetary model in which: i) the unemployed are worse off than the employed, i.e. unemployment is involuntary and ii) the labor force participation rate varies with the business cycle. To illustrate key features of our model, we start with the simplest possible New Keynesian framework with no capital. We then integrate the model into a medium sized DSGE model and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy shocks and two technology shocks. In addition, the model does well at accounting for the response of the labor force and unemployment rate to these three shocks.
Subjects: 
DSGE
unemployment
labor force participation
business cycles
monetary policy
Bayesian estimation
JEL: 
E2
E3
E5
J2
J6
Document Type: 
Working Paper

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