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Unemployment, Imperfect Risk Sharing, and the Monetary Business Cycle

  • Gregory E Givens
Published/Copyright: March 19, 2008
The B.E. Journal of Macroeconomics
From the journal The B.E. Journal of Macroeconomics Volume 8 Issue 1

This paper examines the impact of unemployment insurance on the propagation of monetary disturbances in a staggered price model of the business cycle. To motivate a role for risk sharing behavior, I construct a quantitative equilibrium model that gives prominence to an efficiency-wage theory of unemployment based on an imperfectly observable labor effort. Dynamic simulations reveal that under a full insurance arrangement, staggered price-setting is incapable of generating persistent real effects of a monetary shock. Introducing partial insurance, however, bolsters the amount of endogenous wage rigidity present in the model, enriching the propagation mechanism. Positive real persistence appears in versions of the model that exclude capital accumulation as well as in versions that do not.

Keywords: unemployment; partial insurance; staggered prices; endogenous persistence
Published Online: 2008-3-19

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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  2. The Importance of Industrial Policy in Quality-Ladder Growth Models
  3. The Evolution of International Output Differences (1970-2000): From Factors to Productivity
  4. Non-Linearities and Unit Roots in G7 Macroeconomic Variables
  5. Mitigating the Growth-Effects of Inflation through Financial Development
  6. The Dynamics of European Inflation Expectations
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  9. Expected Equity Returns and the Demand for Money
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  12. Consolidation of Student Loan Repayments and Default Incentives
  13. Advent of Industrial Mass Production: Three Stages of Economic Development
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  17. Economic and Socio-Political Determinants of de Facto Monetary Institutions and Inflationary Outcomes
  18. On Equilibrium Determinacy in New Keynesian Models with Staggered Wage and Price Setting
  19. Contributions Article
  20. Growth-Led Exports: Implications for the Cross-Country Effects of Shocks to Potential Output
  21. Monetary Policy and Fiscal Rules
  22. Choosing Longevity with Overlapping Generations: To Be or Not to Be in Diamond's Model
  23. Nonlinear Taylor Rules and Asymmetric Preferences in Central Banking: Evidence from the United Kingdom and the United States
  24. Baumol's Diseases: A Macroeconomic Perspective
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  27. Unemployment, Imperfect Risk Sharing, and the Monetary Business Cycle
  28. Technological Progress and the Urbanization Process
  29. Convergence by Parts
  30. Estimating Returns to Schooling from State-Level Data: A Macro-Mincerian Approach
  31. Great Moderation(s) and US Interest Rates: Unconditional Evidence
  32. Advances Article
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  35. Africa: Is Aid an Answer?
https://doi.org/10.2202/1935-1690.1613
Keywords for this article
unemployment; partial insurance; staggered prices; endogenous persistence

Articles in the same Issue

  1. Topics Article
  2. The Importance of Industrial Policy in Quality-Ladder Growth Models
  3. The Evolution of International Output Differences (1970-2000): From Factors to Productivity
  4. Non-Linearities and Unit Roots in G7 Macroeconomic Variables
  5. Mitigating the Growth-Effects of Inflation through Financial Development
  6. The Dynamics of European Inflation Expectations
  7. Target Saving in an Overlapping Generations Model
  8. Inequality, Volatility and Labour Market Efficiency
  9. Expected Equity Returns and the Demand for Money
  10. Forecasting with DSGE Models: The Role of Nonlinearities
  11. Job Reallocation, Unemployment and Hours in a New Keynesian Model
  12. Consolidation of Student Loan Repayments and Default Incentives
  13. Advent of Industrial Mass Production: Three Stages of Economic Development
  14. The Japanese Depression in the Interwar Period: A General Equilibrium Analysis
  15. Determinants of Bilateral Remittance Flows
  16. Cyclical Behavior of Unemployment and Job Vacancies: A Comparison between Canada and the United States
  17. Economic and Socio-Political Determinants of de Facto Monetary Institutions and Inflationary Outcomes
  18. On Equilibrium Determinacy in New Keynesian Models with Staggered Wage and Price Setting
  19. Contributions Article
  20. Growth-Led Exports: Implications for the Cross-Country Effects of Shocks to Potential Output
  21. Monetary Policy and Fiscal Rules
  22. Choosing Longevity with Overlapping Generations: To Be or Not to Be in Diamond's Model
  23. Nonlinear Taylor Rules and Asymmetric Preferences in Central Banking: Evidence from the United Kingdom and the United States
  24. Baumol's Diseases: A Macroeconomic Perspective
  25. Employment Growth in the American Urban Hierarchy: Long Live Distance
  26. Endogenous Persistence and the Performance of Inertial Targeting Rules
  27. Unemployment, Imperfect Risk Sharing, and the Monetary Business Cycle
  28. Technological Progress and the Urbanization Process
  29. Convergence by Parts
  30. Estimating Returns to Schooling from State-Level Data: A Macro-Mincerian Approach
  31. Great Moderation(s) and US Interest Rates: Unconditional Evidence
  32. Advances Article
  33. Downward Nominal Wage Rigidity in the OECD
  34. Monetary Policy under Downward Nominal Wage Rigidity
  35. Africa: Is Aid an Answer?
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