In this paper, we estimate a DSGE model built along the lines of the recent Farmer's micro-foundation of the General Theory. Estimating a simple demand-driven competitive-search model, we test the ability of this new theoretical proposal to match the behaviour of the US and Euro Area labour markets. We show that within a relatively simple model we are able to fairly replicate their salient features, confirming for instance the conventional wisdom according to which the US labour market is more flexible than its Euro Area counterpart. Moreover, we provide an estimation of the not-yet-measured (unobserved) Euro Area job vacancies time series.
A DSGE Model from the Old Keynesian Economics: An Empirical Investigation
GUERRAZZI, MARCO
2010-01-01
Abstract
In this paper, we estimate a DSGE model built along the lines of the recent Farmer's micro-foundation of the General Theory. Estimating a simple demand-driven competitive-search model, we test the ability of this new theoretical proposal to match the behaviour of the US and Euro Area labour markets. We show that within a relatively simple model we are able to fairly replicate their salient features, confirming for instance the conventional wisdom according to which the US labour market is more flexible than its Euro Area counterpart. Moreover, we provide an estimation of the not-yet-measured (unobserved) Euro Area job vacancies time series.
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