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Capital, endogenous separations, and the business cycle

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  • van Roye, Björn
  • Wesselbaum, Dennis

Abstract

We implement capital in an endogenous separations New Keynesian matching model. In contrast to the vintage capital theory, we suggest a more general approach, such that workers have unrestricted access to a proportional share of the capital stock. We find that the introduction of capital generates an important channel for the transmission of aggregate productivity shocks, using capital-labor trade-off. The model generates higher volatilities of key variables and therefore enhances the performance of the matching model to generate stylized facts in response to an aggregate productivity shock. However, there is almost no difference for monetary policy shocks.

Suggested Citation

  • van Roye, Björn & Wesselbaum, Dennis, 2009. "Capital, endogenous separations, and the business cycle," Kiel Working Papers 1561, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1561
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    References listed on IDEAS

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    Cited by:

    1. Dennis Wesselbaum, 2013. "Reciprocity and matching frictions," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(3), pages 247-268, September.
    2. Marek Antosiewicz & Piotr Lewandowski, 2014. "What if you were German? - DSGE approach to the Great Recession on labour markets," IBS Working Papers 1/2014, Instytut Badan Strukturalnych, revised Dec 2014.

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    More about this item

    Keywords

    Capital; Endogenous Separations; Search and Matching;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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