Labor markets and monetary policy: A new-Keynesian model with unemployement

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Blanchard, Olivier; Galí, Jordi. Labor markets and monetary policy: A new-Keynesian model with unemployement. 2006
To cite or link this document: Blanchard, Olivier Galí, Jordi
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa 2006-03-01
dc.description.abstract 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.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1076
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.title Labor markets and monetary policy: A new-Keynesian model with unemployement
dc.type info:eu-repo/semantics/workingPaper 2016-06-04T02:51:01Z
dc.subject.keyword Macroeconomics and International Economics
dc.subject.keyword new-keynesian model
dc.subject.keyword labor market frictions
dc.subject.keyword search model
dc.subject.keyword unemployment
dc.subject.keyword sticky prices
dc.subject.keyword real wage rigidities
dc.rights.accessRights info:eu-repo/semantics/openAccess

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