Download or read book Optimal Monetary Policy Rules with Labor Market Frictions written by Ester Faia and published by . This book was released on 2006 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Labor Market Frictions and Optimal Monetary Policy written by Alon Binyamini and published by . This book was released on 2013 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Labor Market Frictions and Optimal Monetary Policy written by Vanessa Blaß and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy with Labor Market Frictions written by Takeki Sunakawa and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Search and Matching Frictions and Optimal Monetary Policy written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Labor Markets and Monetary Policy written by Olivier J. Blanchard and published by . This book was released on 2017 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Labor Markets and Monetary Policy written by Olivier J. Blanchard and published by . This book was released on 2010 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Labor Markets and Monetary Policy written by Olivier J. Blanchard and published by . This book was released on 2008 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Equilibrium Unemployment and Optimal Monetary Policy written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Sectoral Labor Mobility and Optimal Monetary Policy written by Alessandro Cantelmo and published by International Monetary Fund. This book was released on 2017-03-06 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Market Deregulation and Optimal Monetary Policy in a Monetary Union written by Matteo Cacciatore and published by . This book was released on 2013 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: The wave of crises that began in 2008 reheated the debate on market deregulation as a tool to improve economic performance. This paper addresses the consequences of increased flexibility in goods and labor markets for the conduct of monetary policy in a monetary union. We model a two-country monetary union with endogenous product creation, labor market frictions, and price and wage rigidities. Regulation affects producer entry costs, employment protection, and unemployment benefits. We first characterize optimal monetary policy when regulation is high in both countries and show that the Ramsey allocation requires significant departures from price stability both in the long run and over the business cycle. Welfare gains from the Ramsey-optimal policy are sizable. Second, we show that the adjustment to market reform requires expansionary policy to reduce transition costs. Third, deregulation reduces static and dynamic inefficiencies, making price stability more desirable. International synchronization of reforms can eliminate policy tradeoffs generated by asymmetric deregulation.

Download or read book Output Gap in Presence of Financial Frictions and Monetary Policy Trade offs written by Francesco Furlanetto and published by International Monetary Fund. This book was released on 2014-07-18 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent global financial crisis illustrates that financial frictions are a significant source of volatility in the economy. This paper investigates monetary policy stabilization in an environment where financial frictions are a relevant source of macroeconomic fluctuation. We derive a measure of output gap that accounts for frictions in financial market. Furthermore we illustrate that, in the presence of financial frictions, a benevolent central bank faces a substantial trade-off between nominal and real stabilization; optimal monetary policy significantly reduces fluctuations in price and wage inflations but fails to alleviate the output gap volatility. This suggests a role for macroprudential policies.

Download or read book A New Keynesian Model with Unemployment written by Olivier J. Blanchard and published by . This book was released on 2006 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a utility based model of fluctuations, with nominal rigidities, and unemployment. In doing so, we combine two strands of research: the New Keynesian model with its focus on nominal rigidities, and the Diamond-Mortensen-Pissarides model, with its focus on labor market frictions and unemployment. In developing this model, 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 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 real wage rigidities. We show the nature of the tradeoff between inflation and unemployment stabilization, and we draw the implications for optimal monetary policy. Keywords: new Keynesian model, labor market frictions, search model, unemployment, sticky prices, real wage rigidities. JEL Classifications: E32, E50.

Download or read book Identifying the Role of Labor Markets for Monetary Policy in an Estimated DSGE Model written by Kai Philipp Christoffel and published by . This book was released on 2016 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages in line with an optimizing rationale in a New Keynesian closed economy DSGE model. We estimate the model using Bayesian techniques for German data from the late 1970s to present. Given the pre-euro heterogeneity in wage bargaining we take this as the first-best approximation at hand for modelling monetary policy in the presence of labor market frictions in the current European regime. In our framework, we find that labor market structure is of prime importance for the evolution of the business cycle, and for monetary policy in particular. Yet shocks originating in the labor market itself may contain only limited information for the conduct of stabilization policy.

Download or read book The ir relevance of Real Wage Rigidity for Optimal Monetary Policy written by Britta Kohlbrecher and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Monetary Policy Inflation and the Business Cycle written by Jordi Galí and published by Princeton University Press. This book was released on 2015-06-09 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts

Download or read book Unemployment Fluctuations and Stabilization Policies written by Jordi Gali and published by MIT Press. This book was released on 2011-07-01 with total page 119 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new approach for introducing unemployment into the New Keynesian framework. The past fifteen years have witnessed the rise of the New Keynesian model as a framework of reference for the analysis of fluctuations and stabilization policies. That framework, which combines the rigor and internal consistency of dynamic general equilibrium models with such typically Keynesian assumptions as monopolistic competition and nominal rigidities, makes possible a meaningful, welfare-based analysis of the effects of monetary policy rules. But the conspicuous absence of unemployment from the standard New Keynesian model has given rise to both criticism and attempts to rectify this anomaly. In this book, Jordi Galí, one of the major contributors to the New Keynesian literature, offers a new approach to introducing unemployment into that framework. Galí's approach involves a reinterpretation of the labor market in the standard New Keynesian model with staggered wage setting (rather than a modification or extension of the model, as has been proposed by others). The resulting framework preserves the convenience of the representative household paradigm and allows one to determine the equilibrium levels of employment, the labor force, and hence the unemployment rate conditional on the monetary policy in place. Galí develops the basic model, embedding it in a standard New Keynesian framework with staggered price and wage setting; revisits the relationship between economic fluctuations and efficiency through the lens of the new model, developing a measure of the output gap; and analyzes the relation between unemployment and the design of monetary policy.