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Search Unemployment in a Dynamic New Keynesian Model of the Business Cycle

Gerke, Rafael and Rubart, Jens (2003):
Search Unemployment in a Dynamic New Keynesian Model of the Business Cycle.
Darmstadt, In: Darmstadt Discussion Papers in Economics, [Report]

Abstract

The monetary transmission mechanism plays an important role in studying the effects of monetary policy on the real side of the economy. At least since Chari et al. (2000) it is generally accepted that new keynesian models of the business cycle display a "persistence" problem. In this paper, we follow the approach of Walsh (2002) and include search unemployment in a dynamic new keynesian model of the business cycle in order to study the effects of a monetary shock. After deriving the equilibrium solution of the model, we study the behavior of the impulse response functions due to a monetary shock. To complete our analysis we confront the results of our simulation to time series data for the U.S., U.K. and Germany. Our main result is that the introduction of search unemployment does improve the capability of the model to reproduce some stylized facts of the monetary transmission mechanism, however to a less extent than expected.

Item Type: Report
Erschienen: 2003
Creators: Gerke, Rafael and Rubart, Jens
Title: Search Unemployment in a Dynamic New Keynesian Model of the Business Cycle
Language: English
Abstract:

The monetary transmission mechanism plays an important role in studying the effects of monetary policy on the real side of the economy. At least since Chari et al. (2000) it is generally accepted that new keynesian models of the business cycle display a "persistence" problem. In this paper, we follow the approach of Walsh (2002) and include search unemployment in a dynamic new keynesian model of the business cycle in order to study the effects of a monetary shock. After deriving the equilibrium solution of the model, we study the behavior of the impulse response functions due to a monetary shock. To complete our analysis we confront the results of our simulation to time series data for the U.S., U.K. and Germany. Our main result is that the introduction of search unemployment does improve the capability of the model to reproduce some stylized facts of the monetary transmission mechanism, however to a less extent than expected.

Series Name: Darmstadt Discussion Papers in Economics
Volume: 119
Place of Publication: Darmstadt
Uncontrolled Keywords: Search Unemployment, Monetary Shocks, Business Cycles
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
Date Deposited: 29 Oct 2009 14:55
Additional Information:

JEL classification: E24, E32, J40, J63

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