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Nominal Wage Contracts, Search Frictions and the Macroeconomy (in Korean)

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  • Weh-Sol Moon

    (Department of Economics, Seoul Women's University)

Abstract

I construct a dynamic stochastic general equilibrium (DSGE) model characterized by money and flexible price in which search frictions and nominal wage contracts are considered. In the model, firms and workers enter into bargaining over the future nominal wage rate. Worker-firm pairs are subject to aggregate productivity shocks, money growth rate shocks, and idiosyncratic shocks. I examine to what extent the model can explain the business cycle properties of macroeconomic variables in the Korean economy. I find that the model economy with two- or three-period contracts comes close to accounting for the relative volatilities and comovements of the key macroeconomic variables.

Suggested Citation

  • Weh-Sol Moon, 2015. "Nominal Wage Contracts, Search Frictions and the Macroeconomy (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 21(1), pages 65-100, March.
  • Handle: RePEc:bok:journl:v:21:y:2015:i:1:p:65-100
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    More about this item

    Keywords

    Business cycle; Search frictions; Nominal contracts;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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