Casares Polo, MiguelMoreno Pérez, AntonioVázquez, Jesús2018-11-272018-11-2720121869-4187 (Print)1869-4195 (Electronic)10.1007/s13209-011-0079-yhttps://academica-e.unavarra.es/handle/2454/31503Erceg 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.28 p.application/pdfeng© The Author(s) 2011. This article is distributed under the terms of the Creative Commons Attribution License which permits any use, distribution and reproduction in any medium, provided the original author(s) and source are credited.Wage rigidityPrice rigidityUnemploymentinfo:eu-repo/semantics/articleinfo:eu-repo/semantics/openAccess