Employment and Labor Market Dynamics in the Democratic Republic of Congo

In this paper, we develop a DSGE model with labour market frictions à la Pissarides (2000) in order to assess to what extent the dynamics of labour market can account for the business cycle in DRC. The objective of this paper is twofold : (i) to characterize the dynamics of the labour market in DRC by documenting the stylized facts of the data and building a DSGE model with labour market frictions that accounts for wage rigidity; (ii) to evaluate the performance of the model by comparing the moments of simulated data with the stylized facts. Our results show that a positive technological shock impacts on all our variables as expected. Moreover, we also observe that accounting for wage rigidity improves the response of employment and labour market conditions in the economy as a whole.