Unemployment in an Estimated New Keynesian Model

Résumé

Unemployment in an estimated New Keynesian model Following Gali (2009), we introduce unemployment as an observable variable in the estimation of the Smets-Wouters (2007) model. This helps to solve the identification problem of wage mark-up and preference shocks highlighted by Chari, Kehoe and McGrattan (2008). It also allows us to better identify the wage Phillips curve and various output gaps and to analyze the sources of unemployment fluctuations in the US.