Lectures at Doug Laxton’s Workshop on Hot Topics in Macro Modeling, Washington, D.C., April 26 and 27, 2013

The Labor Market and Banking in DSGE Models

By Lawrence J. Christiano

Alternative approaches to unemployment in DSGE models (background manuscript).

a. Wage setting frictions in the New Keynesian model: the role they play, with implications for employment and unemployment.  See this Dynare mod file for the code corresponding to the model developed here.  For further discussions of the implications of sticky wages for unemployment, see this and this. 

b. The search,  matching and Nash bargaining approach to the labor market (i.e., for an excellent introduction, see). A Dynare mod file for code corresponding to the model developed here.

c. Alternating offer bargaining (see this and this). (Dynare mod file and steady state program to reproduce the computations using the simple model.)

Banking in DSGE models: models of unconventional monetary policy and leverage.

a. Unconventional monetary policy (background reading).

b.Macro prudential policy in a DSGE model: leverage restrictions (background reading and code used to construct graphs and tables).