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arXiv · 2512.13627

Job insecurity, equilibrium determinacy and E-stability in a New Keynesian model with asymmetric information. Theory and simulation analysis

Luca Vota·Luisa Errichiello
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Abstract

Departing from the dominant approach focused on individual and meso-level determinants, this paper develops a macroeconomic formalization of job insecurity within a New Keynesian framework in which the standard IS-NKPC-Taylor rule block is augmented with labor-market frictions. The model features partially informed private agents who receive a noisy signal about economic fundamentals from a fully informed public sector. When monetary policy satisfies the Taylor principle, the equilibrium is unique and determinate. However, the release of news about current or future fundamentals can generate a "Paradox of Transparency" through general-equilibrium interactions between aggregate demand and monetary policy. When the Taylor principle is violated, belief-driven equilibria may emerge. Validation exercises based on the Simulated Method of Moments support the empirical plausibility of the model's key implications.

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Luca Vota, Luisa Errichiello. 2025-12-15. Job insecurity, equilibrium determinacy and E-stability in a New Keynesian model with asymmetric information. Theory and simulation analysis. https://arxiv.org/abs/2512.13627

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