Author: Martin BodensteinPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Employment, Wages and Optimal Monetary Policy
Author: Martin BodensteinEmployment, Hours and Optimal Monetary Policy
Author: 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.
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.
The (ir)relevance of Real Wage Rigidity for Optimal Monetary Policy
Author: Britta KohlbrecherPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Real wage rigidity is known to create a substantial trade-off between inflation and employment stabilization for monetary policy in New Keynesian models with search frictions on the labor market. This paper shows that, quantitatively, this finding hinges very much on the assumption of constant returns to scale in production. With decreasing returns to scale, monetary policy with a single focus on inflation stabilization is close to optimal. The reason is twofold: Firms cushion the impact of rigid real wages on marginal costs by adjusting the marginal product of labor over the cycle. In addition, given employment fluctuations have a smaller effect on consumption volatility. Decreasing returns to scale thus remove the need for active monetary policy even if wages are rigid. Importantly, this contrasts with the implications of combining real wage rigidity and decreasing returns to scale for other policy instruments.
Optimal Monetary Policy and Alternative Wage Indexation Schemes in a Model with Interest-sensitive Labor Supply
Author: David D. VanHoosePublisher:
ISBN:
Category : Labor supply
Languages : en
Pages : 38
Book Description
Strategic Monetary Policy with Non-atomistic Wage-setters
Author: Francesco LippiPublisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 46
Book Description
Strategic Monetary Policy with Non-atomistic Wage-setters
Author: Francesco LippiPublisher:
ISBN:
Category : Inflation
Languages : en
Pages : 48
Book Description
Designing a Simple Loss Function for Central Banks
Author: Davide DebortoliPublisher: International Monetary Fund
ISBN: 1484311752
Category : Business & Economics
Languages : en
Pages : 56
Book Description
Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
Optimal Fiscal and Monetary Policy with Costly Wage Bargaining
Author: David M. ArseneauPublisher:
ISBN:
Category : Collective bargaining
Languages : en
Pages : 64
Book Description