Author: Ester FaiaPublisher:
ISBN:
Category :
Languages : en
Pages : 33
Book Description
Optimal Monetary Policy Rules with Labor Market Frictions
Author: Ester FaiaLabor Market Frictions and Optimal Monetary Policy
Author: Alon BinyaminiLabor Market Frictions and Optimal Monetary Policy
Author: Vanessa BlaßOptimal Monetary Policy with Labor Market Frictions
Author: Takeki SunakawaPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This paper introduces right-to-manage bargaining into a labor search model with sticky prices instead of standard efficient bargaining and examines the Ramsey-optimal monetary policy. Without real wage rigidity, even when the steady state is inefficient, price stability is nearly optimal in response to technology or government shocks. Right-to-manage bargaining creates the wage channel to inflation, as there is a direct relationship between real wages and real marginal cost. In the presence of the wage channel, price markups consist of only real marginal cost, and real wages and hours per worker are determined such as in the Walrasian labor market.
Search and Matching Frictions and Optimal Monetary Policy
Author: Publisher:
ISBN: 9780753020494
Category : Keynesian economics
Languages : en
Pages :
Book Description
I analyze optimal monetary policy in an economy with search and matching frictions in the labor market and staggered nominal wage and price contracts. In this framework, as opposed to the standard New Keynesian model, preset nominal wages need not have any effect on existing employment relationships. However, staggered bargaining of nominal wages distorts aggregate job creation and creates inefficient dispersion in hiring rates across firms. Targeting zero inflation (the optimal policy in the standard New Keynesian model) only magnifies these distortions. The optimal policy allows for non-zero inflation in response to real shocks, so as to reduce the rigidity of real wages. Quantitatively, the case against price stability as the sole goal of monetary policy turns out to be important.
Labor Markets and Monetary Policy
Author: Olivier J. BlanchardPublisher:
ISBN:
Category :
Languages : en
Pages : 42
Book Description
We construct a utility-based model of fluctuations, with nominal rigidities and unemployment, and draw its implications for the unemployment-inflation trade- off and for the conduct of monetary policy. We proceed in two steps. We first leave nominal rigidities aside. We show that, under a standard utility specification, productivity shocks have no effect on unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage setting mechanisms for fluctuations in un- employment. We show the role of labor market frictions and real wage rigidities in determining the effects of productivity shocks on unemployment. We then introduce nominal rigidities in the form of staggered price setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence of labor market frictions and real wage rigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and its dependence on labor market characteristics. We draw the implications for optimal monetary policy.
Labor Markets and Monetary Policy
Author: Olivier J. BlanchardPublisher:
ISBN:
Category :
Languages : en
Pages : 42
Book Description
We construct a utility-based model of fluctuations, with nominal rigidities and unemployment, and draw its implications for the unemployment-inflation tradeoff and for the conduct of monetary policy.lt;brgt;lt;brgt;We proceed in two steps. We first leave nominal rigidities aside. We show that, under a standard utility specification, productivity shocks have no effect on unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage setting mechanisms for fluctuations in unemployment. We show the role of labor market frictions and real wage rigidities in determining the effects of productivity shocks on unemployment.lt;brgt;lt;brgt;We then introduce nominal rigidities in the form of staggered price setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence of labor market frictions and real wage rigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and its dependence on labor market characteristics. We draw the implications for optimal monetary policy.
Labor Markets and Monetary Policy
Author: Olivier J. BlanchardPublisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 42
Book Description
We construct a utility-based model of fluctuations, with nominal rigidities and unemployment, and draw its implications for the unemployment-inflation tradeoff and for the conduct of monetary policy. We proceed in two steps. We first leave nominal rigidities aside. We show that, under a standard utility specification, productivity shocks have no effect on unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage setting mechanisms for fluctuations in unemployment. We show the role of labor market frictions and real wage rigidities in determining the effects of productivity shocks on unemployment. We then introduce nominal rigidities in the form of staggered price setting by firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence of labor market frictions and real wage rigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and its dependence on labor market characteristics. We draw the implications for optimal monetary policy.
Equilibrium Unemployment and Optimal Monetary Policy
Author: Publisher:
ISBN: 9780753020494
Category : Keynesian economics
Languages : en
Pages :
Book Description
I introduce unemployment into the New Keynesian model by assuming search and matching frictions in the labor market, and analyze the implications for optimal monetary policy. In this framework, firms can adjust both their number of workers and hours per worker. Social efficiency requires eliminating inflation, closing the output gap (equivalently, setting hours at their efficient level), as well as preventing deviations of employment from its efficient path. I show that, provided the economy's steady state is efficient, if wages follow the Nash bargaining rule the central bank can achieve the efficient allocation. If wages are rigid, then the central bank faces a trade-off among its stabilization objectives. Following e.g. a negative productivity shock, the central bank must temporarily concede an increase in inflation, a drop in the output gap and a fall in employment below its efficient path.
Sectoral Labor Mobility and Optimal Monetary Policy
Author: Alessandro CantelmoPublisher: International Monetary Fund
ISBN: 1475584830
Category : Business & Economics
Languages : en
Pages : 33
Book Description
In an estimated two-sector New-Keynesian model with durable and nondurable goods, an inverse relationship between sectoral labor mobility and the optimal weight the central bank should attach to durables inflation arises. The combination of nominal wage stickiness and limited labor mobility leads to a nonzero optimal weight for durables inflation even if durables prices were fully flexible. These results survive alternative calibrations and interestrate rules and point toward a non-negligible role of sectoral labor mobility for the conduct of monetary policy.