TY  - JOUR
AU  - Christiano,Lawrence J.
AU  - Trabandt,Mathias
AU  - Walentin,Karl
TI  - Involuntary Unemployment and the Business Cycle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15801
PY  - 2010
Y2  - March 2010
UR  - http://www.nber.org/papers/w15801
L1  - http://www.nber.org/papers/w15801.pdf
N1  - Author contact info:
Lawrence Christiano
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8231
Fax: 847/491-7001
E-Mail: l-christiano@northwestern.edu

Mathias Trabandt
Board of Governors of the Federal Reserve System
Division of International Finance
Trade and Financial Studies Section
20th Street and Constitution Avenue N.W.
Washington, D.C. 20551
Tel: +1-202-492-6999
E-Mail: mathias.trabandt@gmail.com

Karl Walentin
Sveriges Riksbank
103 37 Stockholm
Sweden
Tel: +46-8-7870491
Fax: +46-8-210531
E-Mail: karl.walentin@riksbank.se
AB  - We propose a monetary model in which the unemployed satisfy the official US definition of unemployment: they are people without jobs who are (i) currently making concrete efforts to find work and (ii) willing and able to work. In addition, our model has the property that people searching for jobs are better off if they find a job than if they do not (i.e., unemployment is ‘involuntary’). We integrate our model of involuntary unemployment into the simple New Keynesian framework with no capital and use the resulting model to discuss the concept of the ‘non-accelerating inflation rate of unemployment’. We then integrate the model into a medium sized DSGE model with capital and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy shocks and two technology shocks. In addition, the model does well at accounting for the response of the labor force and unemployment rate to the three shocks.
ER  -