Labor Selection, Turnover Costs, and Optimal Monetary Policy

Merkl C, Faia E, Lechthaler W (2014)


Publication Language: English

Publication Status: Published

Publication Type: Journal article

Publication year: 2014

Journal

Publisher: Wiley-Blackwell

Book Volume: 46

Pages Range: 115-144

Journal Issue: 1

DOI: 10.1111/jmcb.12099

Abstract

We study optimal monetary policy and welfare properties of a dynamic stochastic general equilibrium (DSGE) model with a labor selection process, labor turnover costs, and Nash bargained wages. We show that our model implies inefficiencies that cannot be offset in a standard wage bargaining regime. We also show that the inefficiencies rise with the magnitude of firing costs. As a result, in the optimal Ramsey plan, the optimal inflation volatility deviates from zero and is an increasing function of firing costs.

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How to cite

APA:

Merkl, C., Faia, E., & Lechthaler, W. (2014). Labor Selection, Turnover Costs, and Optimal Monetary Policy. Journal of Money, Credit and Banking, 46(1), 115-144. https://dx.doi.org/10.1111/jmcb.12099

MLA:

Merkl, Christian, Ester Faia, and Wolfgang Lechthaler. "Labor Selection, Turnover Costs, and Optimal Monetary Policy." Journal of Money, Credit and Banking 46.1 (2014): 115-144.

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