Record number :
846225
Title of article :
Search and matching frictions and optimal monetary policy
Author/Authors :
Carlos Thomas، نويسنده ,
Issue Information :
روزنامه با شماره پیاپی سال 2008
Pages :
21
From page :
936
To page :
956
Abstract :
A recent literature has merged the New Keynesian and the search and matching frameworks, which has allowed the former to analyze the joint dynamics of unemployment and inflation. This paper analyzes optimal monetary policy in this kind of hybrid framework. I show that zero inflation is optimal when all wages are Nash bargained in every period and the economy’s steady state is efficient. In the more realistic case in which nominal wage bargaining is staggered, a case against price stability arises: in response to real shocks, the central bank should use price inflation so as to avoid excessive unemployment volatility and excessive dispersion in hiring rates. For a plausible calibration, the welfare loss under the zero inflation policy is about three times as large as under the optimal policy
Keywords :
Search and matchingNew KeynesianMonetary policy
Journal title :
Journal of Monetary Economics
Serial Year :
2008
Link To Document :
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