Template-type: ReDIF-Paper 1.0

Author-Name: Chun-Hung Kuo
Author-Name-First: Chun-Hung
Author-Name-Last: Kuo
Author-Workplace-Name: International Univeristy of Japan
Author-Name: Hiroaki Miyamoto
Author-Name-First: Hiroaki
Author-Name-Last: Miyamoto
Author-Workplace-Name: The University of Tokyo
Title: Unemployment and Wage Rigidity in Japan: A DSGE Model Perspective
Abstract: This paper develops a dynamic stochastic general equilibrium model with labor market frictions and nominal wage rigidity. We estimate our model for Japan's economy using Bayesian methods. This allows us to estimate the structural parameters of the Japanese economy, the unobservable shocks and examine their transmission mechanism. We can also study how wage rigidity affects overall model performance. Our analysis demonstrates the importance of including nominal wage rigidity in explaining the Japanese data. We find that while nominal wage rigidity plays only a trivial role in inflation dynamics, it is crucial in determining the response of labor market variables to structural shocks.
Classification-JEL: E24, E32, J64
Length: 33 pages

Creation-Date: 2016-05
Number: EMS_2016_06
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2016_06.pdf

File-Format: Application/pdf

File-Function: First version, 2016
File-Size: 290KB
Keywords: DSGE models, Bayesian estimation, Labor market search, Wage rigidity
Handle: RePEc:iuj:wpaper:EMS_2016_06