Journal article


Labor Selection, Turnover Costs, and Optimal Monetary Policy


Publication Details
Author(s): Merkl C, Faia E, Lechthaler W
Publisher: Wiley-Blackwell
Publication year: 2014
Volume: 46
Journal issue: 1
Pages range: 115-144
ISSN: 0022-2879
Language: English

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.



Focus Area of Individual Faculties


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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