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Labor Market Frictions into Staggered Wage Contracts

Author

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  • Francesco Zanetti

    (Bank of England and EABCN)

Abstract

This paper proposes a generalization of the Calvo wage-setting equation, which embeds labor market frictions in the form of a Nash wage bargain. Adding labor market frictions changes significantly the dynamics of the standard wage-setting equation, such that it may have non-trivial implications for the design of optimal monetary policy, and could improve the ability of a general equilibrium model to replicate important labor market stylized facts.

Suggested Citation

  • Francesco Zanetti, 2006. "Labor Market Frictions into Staggered Wage Contracts," Economics Bulletin, AccessEcon, vol. 5(13), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-06e30028
    as

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    File URL: http://www.accessecon.com/pubs/EB/2006/Volume5/EB-06E30028A.pdf
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    References listed on IDEAS

    as
    1. Robert E. Hall, 2006. "The labor market and macro volatility: a nonstationary general-equilibrium analysis," Proceedings, Federal Reserve Bank of San Francisco.
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    3. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
    4. Zanetti, Francesco, 2006. "Labor Market Frictions, Indeterminacy, and Interest Rate Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(7), pages 1959-1970, October.
    5. Huang, Kevin X. D. & Liu, Zheng, 2002. "Staggered price-setting, staggered wage-setting, and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 405-433, March.
    6. Blanchard, Olivier & Galί, Jordi, 2006. "A New Keynesian Model with Unemployment," Kiel Working Papers 1335, Kiel Institute for the World Economy (IfW Kiel).
    7. Rabanal, Pau & Rubio-Ramirez, Juan F., 2005. "Comparing New Keynesian models of the business cycle: A Bayesian approach," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1151-1166, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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