ABOUT BOOK

none2We present a DSGE New Keynesian model with indivisible labor and a dual labor market: a walrasian one where wages are fully flexible and a unionized one charaterized by real wage rigidity. We show that the negative e¤ect of a productivity shock on inflation and the positive effect of a cost-push shock are crucially determined by the proportion of firms that belong to the unionized sector. The larger this number, the larger are these effects. Consequently, the larger the union coverage, the larger should be the optimal response of the nominal interest rate to exogenous productivity and cost-push shocks. The optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases. Impact Factor: 0.885 5-Year Impact Factor: 1.189The journal provides an outlet for publication of research concerning all theoretical and empirical aspects of economic dynamics and control as well as the development and use of computational methods in economics and finance. Contributions regarding computational methods may include, but are not restricted to, artificial intelligence, databases, decision support systems, genetic algorithms, modelling languages, neural networks, numerical algorithms for optimization, control and equilibria, parallel computing and qualitative reasoning.Mattesini Fabrizio; Rossi LorenzaMattesini, Fabrizio; Rossi, Lorenz