Wage rigidities in an estimated DSGE model of the UK labour market
نویسندگان
چکیده
This paper estimates a New Keynesian model with matching frictions and nominal wage rigidities on UK data. The estimation enables the identification of important structural parameters of the British economy, the recovery of the unobservable shocks that affected the UK economy since 1975 and the study of the transmission mechanism. Results show that with matching frictions wage rigidities have limited effect on inflation dynamics, despite improving the empirical performance of the model. The reason is that wage rigidities appear to affect both the unit labour costs and a component related to matching frictions such that the marginal costs remains virtually unaffected.
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