Publication
Jun 2007
This paper examines the impact of firms' employment decisions on inflation dynamics. Firms adjust labor at the intensive and the extensive margin. Moreover, employment adjustment is not frictionless. Based on these assumptions, the authors develop a New Keynesian model to estimate the impact on inflation. They find that the presence of an empirically plausible labor adjustment decision at the firm level rationalizes strategic complementarities in price-setting which helps explain inflation dynamics.
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English (PDF, 29 pages, 233 KB) |
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Author | Tommy Sveen, Lutz Weinke |
Series | Kiel Institute Working Papers |
Issue | 1368 |
Publisher | Kiel Institute for the World Economy |
Copyright | © 2007 Kiel Institute for the World Economy |