An Estimated New-Keynesian Model with Unemployment as Excess Supply of Labor

Wage stickiness is incorporated to a New-Keynesian model with variable capital to drive endogenous unemployment uctuations de ned as the log di¤erence between aggregate labor supply and aggregate labor demand. We estimated such model using Bayesian econometric techniques and quarterly U.S. data. The second-moment statistics of the unemployment rate in the model give a good t to those observed in U.S. data. Our results also show that wage-push shocks, demand shifts and monetary policy shocks are the three major determinants of unemployment fl uctuations. Compared to an estimated New-Keynesian model without unemployment (Smets and Wouters, 2007): wage stickiness is higher, labor supply elasticity is lower, the slope of the New-Keynesian Phillips curve is flatter, and the importance of technology innovations on output variability increases.Miguel Casares would like to thank both the Spanish government (research project ECO2011-24304) and Fundación Ramón Areces (VII Concurso Investigación en Economía) for their nancial support. Antonio Moreno and Jesús Vázquez would also like to thank the Spanish government (research projects ECO2009-11151 and ECO2010-16970, respectively) for their nancial support