This paper studies disinflationary shocks in a non-linear New Keynesian model with search and matching frictions and moral hazard in the labor markets. Our focus is on understanding the wage formation process as well as welfare costs of disinflations in the presence of such labor market frictions.

Author’s Name: Jong Kook Shin and Chetan Subramanian
Journal Name: Journal of Macroeconomics
Year of Publication: September 2014
Volume: Vol. 41, September 2014, Pg: 1-15
URL: http://www.sciencedirect.com/science/article/pii/S0164070414000524