Keywords: wage stickiness, New Keynesian model, unemployment fluctuations, Phillips curve, insider-outsider model
JEL codes: E24, E31, E32
Abstract
The unemployment rate in the euro area appears to contain a significant nonstationary component, suggesting that some shocks have permanent effects on that variable. I explore possible sources of this nonstationarity through the lens of a New Keynesian model with unemployment, and assess their empirical relevance.
