Paper #1506

Título:

Insider-outsider labor markets, hysteresis and monetary policy

Autor:

Jordi Galí

Fecha:

Septiembre 2015 (Revisado: Junio 2020)

Resumen:

I 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.

Palabras clave:

wage stickiness, New Keynesian model, unemployment fluctuations, Phillips curve, monetary policy tradeoffs.

Códigos JEL:

E24, E31, E32.

Área de investigación:

Macroeconomía y Economía Internacional

Publicado en:

Journal of Money, Credit and Banking 54(S1), 53-88, 2022.

Descargar el paper en formato PDF (1.594 Kb)