Open Access
Wage stickiness and unemployment fluctuations: an alternative approach
(2009) Casares Polo, Miguel; Moreno Pérez, Antonio; Vázquez, Jesús; Economía; Ekonomia
Erceg, Henderson and Levin (2000, Journal of Monetary Economics) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using Bayesian econometric techniques, both models are estimated with U.S. quarterly data of the Great Moderation. Estimation results are similar and provide a good empirical fit with the crucial difference that our proposal delivers unemployment fluctuations. Thus, second-moment statistics of U.S. unemployment are replicated reasonably well in our proposed New-Keynesian model with sticky wages. In the welfare analysis, the cost of cyclical fluctuations during the Great Moderation is estimated at 0.60% of steady-state consumption.
Open Access
The great moderation of inflation: a structural analysis of recent U.S. monetary business cycles
(2012) Casares Polo, Miguel; Vázquez, Jesús; Economía; Ekonomia
U.S. inflation has experienced a great moderation in the last two decades. This paper examines the factors behind this and other stylized facts, such as the weaker correlation of inflation and nominal interest rate (Gibson paradox). Our findings point at lower exogenous variability of supply-side shocks and, to a lower extent, structural changes in money demand, monetary policy, and firms’ sticky pricing behavior as the main driving forces of the changes observed in recent U.S. business cycles.
Open Access
An estimated new-Keynesian model with unemployment as excess supply of labor
(2010) Casares Polo, Miguel; Moreno Pérez, Antonio; Vázquez, Jesús; Economía; Ekonomia
As one alternative to search frictions, wage stickiness is introduced in a New-Keynesian model to generate endogenous unemployment fluctuations due to mismatches between labor supply and labor demand. The effects on an estimated New-Keynesian model for the U.S. economy are: i) the Calvo-type probability on wage stickiness rises, ii) the labor supply elasticity falls, iii) the implied second-moment statistics of the unemployment rate provide a reasonable match with those observed in the data, and iv) wage-push shocks, demand shifts and monetary policy shocks are the three major determinants of unemployment fluctuations.
Open Access
Why are labor markets in Spain and Germany so different?
(2016) Casares Polo, Miguel; Vázquez, Jesús; Economía; Ekonomia
The volatility of unemployment fluctuations has been about 3 times higher in Spain than in Germany over the recent business cycles (1996-2013). In contrast, fluctuations of the rate of wage inflation were significantly more volatile in Germany than in Spain. We estimate a New-Keynesian model and find several explanatory factors: wage rigidity has been higher in Spain, the labor force has been more elastic in Germany than in Spain, large and persistent shocks augmenting the labor force have been estimated for Spain whereas in Germany there have been substantial shocks reducing the intensity of hours per worker, and the ECB’s policy design brought monetary shocks with much greater influence to the Spanish unemployment.
Open Access
Data revisions in the estimation of DSGE models
(2011) Casares Polo, Miguel; Vázquez, Jesús; Economía; Ekonomia
Revisions of US macroeconomic data are not white-noise. They are persistent, correlated with real-time data, and with high variability (around 80% of volatility observed in US real-time data). Their business cycle effects are examined in an estimated DSGE model that distinguishes real-time data from final data. Both the consumption habit formation and the price indexation to lagged inflation fall significantly in the estimation. The model also shows that revision shocks of both output and inflation are expansionary because they occur when real-time published data are too low and the Fed reacts by cutting interest rates. Consumption revisions, by contrast, are countercyclical as consumption habits mirror the observed reduction in real-time consumption. Finally, revisions of the three variables explain 9.3% of changes of output in its long-run variance decomposition.
Open Access
Wage stickiness and unemployment fluctuations: an alternative approach
(Springer, 2012) Casares Polo, Miguel; Moreno Pérez, Antonio; Vázquez, Jesús; Economía; Ekonomia
Erceg et al. (J Monet Econ 46:281–313, 2000) introduce sticky wages in a New-Keynesian general-equilibrium model. Alternatively, it is shown here how wage stickiness may bring unemployment fluctuations into a New-Keynesian model. Using a Bayesian econometric approach, bothmodels are estimated with US quarterly data of the Great Moderation. Estimation results are similar in the two models and both provide a good empirical fit, with the crucial difference that our model delivers unemployment fluctuations. Thus, second-moment statistics of the US rate of unemployment are replicated reasonably well in our proposed New-Keynesian model with sticky wages. Demand-side shocks play a more important role than technology innovations or cost-push shock in explaining both output and unemployment fluctuations. In the welfare analysis, the cost of cyclical fluctuations during the Great Moderation is estimated at 0.60% of steady-state consumption.