Involuntary Unemployment and the Business Cycle

  title={Involuntary Unemployment and the Business Cycle},
  author={Lawrence J. Christiano and Mathias Trabandt and Karl Walentin},
We propose a monetary model in which the unemployed satisfy the o¢ cial US de…nition of unemployment: they are people without jobs who are (i) currently making concrete e¤orts to …nd work and (ii) willing and able to work. In addition, our model has the property that people searching for jobs are better o¤ if they …nd 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… CONTINUE READING
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