Resource title

Inflation Dynamics and Labor Market Dynamics Revisited

Resource image

image for OpenScout resource :: Inflation Dynamics and Labor Market Dynamics Revisited

Resource description

Firms adjust labor both at the intensive and at the extensive margin (see, e.g., Hansen and Sargent 1988). Moreover, employment adjustment is not frictionless (see, e.g., Mortensen and Pissarides 1994). What does this imply for inflation dynamics? To address this question we develop a New Keynesian model featuring two margins of labor adjustment as well as a simultaneous price-setting and employment decision at the firm level. We find that the presence of an empirically plausible labor adjustment decision at the firm level rationalizes strategic complementarities in price-setting which help explain inflation dynamics.

Resource author

Tommy Sveen, Lutz Weinke

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/17880

Resource license

Adapt according to the presented license agreement and reference the original author.