Prepared for the JMCB conference in honor of Ernst Baltensperger, Bern, Switzerland, 2007. Mark Gertler thanks the National Science Foundation and the Guggenheim Foundation for financial support.
An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining
Article first published online: 24 NOV 2008
© 2008 The Ohio State University
Journal of Money, Credit and Banking
Volume 40, Issue 8, pages 1713–1764, December 2008
How to Cite
GERTLER, M., SALA, L. and TRIGARI, A. (2008), An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining. Journal of Money, Credit and Banking, 40: 1713–1764. doi: 10.1111/j.1538-4616.2008.00180.x
- Issue published online: 24 NOV 2008
- Article first published online: 24 NOV 2008
- Received October 17, 2007; and accepted in revised form August 13, 2008.
- DSGE models;
- Bayesian estimation;
- labor market search;
- staggered wage bargaining
We develop and estimate a medium scale macroeconomic model that allows for unemployment and staggered nominal wage contracting. In contrast to most existing quantitative models, employment adjustment is on the extensive margin and the employment of existing workers is efficient. Wage rigidity, however, affects the hiring of new workers. The former is introduced via the staggered Nash bargaining setup of Gertler and Trigari (2006). A robust finding is that the model with wage rigidity provides a better description of the data than does a flexible wage version. Overall, the model fits the data roughly as well as existing quantitative macroeconomic models, such as Smets and Wouters (2007) or Christiano, Eichenbaum, and Evans (2005). More work is necessary, however, to ensure a robust identification of the key labor market parameters.