UNCERTAINTY, WAGES AND THE BUSINESS CYCLE

• 成果类型: Article
• 署名作者: Cacciatore, Matteo; Ravenna, Federico
• 署名单位: Universite de Montreal; HEC Montreal; Bank of Canada; University of Copenhagen
• 刊物名称: ECONOMIC JOURNAL
• ISSN/ISSBN: 0013-0133
• DOI: 10.1093/ej/ueab019
• 发表日期: 2021
• 页码: 2797-2823
• 关键词: equilibrium unemployment; cyclical behavior; monetary-policy; RIGIDITY; shocks; MODEL; RISK; fluctuations; search

摘要

We show that limited wage flexibility in economic downturns generates strong and state-dependent amplification of uncertainty shocks. It also explains the cyclical behaviour of empirical measures of uncertainty. In the presence of matching frictions, an occasionally binding constraint on downward wage adjustment enhances the concavity of firms' hiring rule, resulting in an endogenous profit risk-premium. In turn, higher uncertainty increases the profit risk-premium when the economy operates close to the wage constraint, deepening a recession. Non-linear local projections and vector autoregression estimates support the model predictions. In addition, we show that measured uncertainty rises in a recession even without uncertainty shocks.