Unemployment in an Estimated New Keynesian Model

Jordi Galí, Frank Smets and Raf Wouters

No 17084, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: D58 E24 E31 E32 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-cba, nep-lab and nep-mac
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (219)

Published as Jordi Gal� & Frank Smets & Rafael Wouters, 2012. "Unemployment in an Estimated New Keynesian Model," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 329 - 360.
Published as Unemployment in an Estimated New Keynesian Model , Jordi Galí, Frank Smets, Rafael Wouters. in NBER Macroeconomics Annual 2011, Volume 26 , Acemoglu and Woodford. 2012

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Related works:
Journal Article: Unemployment in an Estimated New Keynesian Model (2012)
Working Paper: Unemployment in an Estimated New Keynesian Model (2012)
Chapter: Unemployment in an Estimated New Keynesian Model (2011)
Working Paper: Unemployment in an Estimated New Keynesian Model (2011)
Working Paper: Unemployment in an Estimated New Keynesian Model (2011)
Working Paper: Unemployment in an Estimated New Keynesian model (2011)
Working Paper: Unemployment in an estimated new Keynesian model (2011)
Working Paper: Unemployment in an Estimated New Keynesian Model (2010)
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