Unemployment in an Estimated New Keynesian Model / Jordi Galí, Frank Smets, Rafael Wouters.

Format:

Book

Author/Creator:

Galí, Jordi.

Contributor:

National Bureau of Economic Research.

Smets, Frank.

Wouters, Rafael.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17084.

NBER working paper series no. w17084

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of identification of wage markup and labor supply shocks highlighted by Chari, Kehoe and McGrattan (2008) in their criticism of New Keynesian models, and allows us to estimate a "correct" measure of the output gap. In addition, the estimated model can be used to analyze the sources of unemployment fluctuations.

Notes:

Print version record

May 2011.