Modern monetary business-cycle models rely heavily on price and wage rigidity. While there is substantial evidence that prices do not adjust frequently, there is much less evidence on whether wage rigidity is an important feature of real world labor markets. While real average hourly earnings...

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...

The paper estimates the NAIRU from a Phillips curve relationship in the state-space framework. To identify the inflation-unemployment trade-off we account for a time-varying inflation trend to control for the part of inflation that is not affected by the cyclical component of unemployment. In...

In this paper we present an extension of the Taylor model with staggered wages in which wage-setting is also influenced by reference norms (i.e. by benchmark wages). We show that reference norms can considerably increase the persistence of inflation and the extent of real wage rigidity but that...

The authors of this paper formulate a disequilibrium AS-AD model based on sticky wages and prices, perfect foresight of current inflation rates and adaptive expectations concerning the inflation climate in which the economy operates. The model consists of a wage and a price Phillips curves, a...

We set up and estimate a structural unobserved components open economy model for the rate of unemployment and the real exchange rate in Sweden. This approach enables us to simultaneously determine changes in both cyclical and equilibrium rates. Our results show that the Natural Rate/NAIRU has...

The paper estimates the NAIRU from a Phillips curve relationship in the state-space framework. To identify the inflation-unemployment trade-off we account for a time-varying inflation trend to control for the part of inflation that is not affected by the cyclical component of unemployment. In...

This paper integrates a theory of equilibrium unemployment into a monetary model with nominal price rigidities. The model is used to study the dynamic response of the economy to a monetary policy shock. The labor market displays search and matching frictions and bargaining over real wages and...

A common assumption when analysing unemployment is that the economy is closed. However, the equilibrium rate of unemployment is not identified in an open economy unless the foreign sector is modeled. Therefore we set up and estimate a structural unobserved components open economy model for the...