Galí, JordiUniversitat Pompeu Fabra. Departament d'Economia i Empresa2024-11-142024-11-142015-09-01Journal of Money, Credit and Banking 54(S1), 53-88, 2022.http://hdl.handle.net/10230/26836I develop a version of the New Keynesian model with insideroutsider labor markets and hysteresis that can account for the high persistence of European unemployment. I study the implications of that environment for the design of monetary policy. The optimal policy calls for strong emphasis on (un)employment stabilization which a standard interest rate rule fails to deliver, with the gap between the two increasing in the degree of hysteresis. Two simple targetiing rules are shown to approximate well the optimal policy. The properties of the model and effects of different policies are analyzed through the lens of the labor wedge and its components.application/pdfengL'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative CommonsInsider-outsider labor markets, hysteresis and monetary policy<resourceType xmlns="http://datacite.org/schema/kernel-3" resourceTypeGeneral="Other">info:eu-repo/semantics/workingPaper</resourceType><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">wage stickiness</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">new keynesian model</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">unemployment fluctuations</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">phillips curve</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">monetary policy tradeoffs.</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">Macroeconomics and International Economics</subject><rights xmlns="http://datacite.org/schema/kernel-3">info:eu-repo/semantics/openAccess</rights>