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Discussion Paper Details

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Title: Real Business Cycles with Involuntary Unemployment

Author(s): Jordi Galí

Publication Date: June 1995

Keyword(s): Endogenous Mark-ups, Insider-Outsider Models, Real Business Cycles and Unemployment

Programme Area(s): International Macroeconomics

Abstract: We develop and analyse a real business cycle model in which both goods and labour markets are characterized by imperfect competition. In equilibrium, unemployment emerges as the result of the market power exercised by insiders at the firm level. We show that a calibrated version of the model is capable of generating both a procyclical labour supply and a countercyclical unemployment rate, in a way qualitatively consistent with US data.

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Bibliographic Reference

Galí, J. 1995. 'Real Business Cycles with Involuntary Unemployment'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1206