TY  - UNPD
A1  - Blanchard, Olivier
A1  - Galí, Jordi
T1  - A new Keynesian model with unemployment
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2007,08
N2  - We develop a utility based model of fluctuations, with nominal rigidities, and unemployment. In doing so, we combine two strands of research: the New Keynesian model with its focus on nominal rigidities, and the Diamond-Mortensen-Pissarides model, with its focus on labor market frictions and unemployment. In developing this model, we proceed in two steps. We first leave nominal rigidities aside. We show that, under a standard utility specification, productivity shocks have no effect on unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage setting mechanisms for fluctuations in unemployment. We then introduce nominal rigidities in the form of staggered price setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence of real wage rigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and we draw the implications for optimal monetary policy. JEL Classification: E32, E50
T3  - CFS working paper series - 2007, 08 
KW  - New Keynesian Model
KW  - Labor Market Frictions
KW  - Search Model
KW  - Unemployment
KW  - Sticky Prices
KW  - Real Wage Rigidities
KW  - Neokeynesianismus
KW  - Arbeitsmarkt
KW  - Friktionelle Arbeitslosigkeit
Y1  - 2007
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1599
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-38183
N1  - Version Juli 18, 2006
IS  - Version July 18, 2006
ER  -