Macroeconomic shocks in a dynamized model of the natural rate of unemployment

Abstract

At the microeconomic level, this paper revises and broadens the theory of the equilibrium rate of unemployment, the "natural rate' in a monetary model. We begin by reacting Salop's turnover model of the natural rate in its naturally intertemporal version. Useful findings on impact effects and the adjustment process at the individual firm, necessarily excluded by the static version, are shown to derive from the dynamized model. At the macroeconomic level, we then provide a general-equilibrium analysis of some shocks showing how they drive the equilibrium unemployment rate and in varying ways also disturb the real rate of interest. -Author