Quadratic labor adjustment costs, business cycle dynamics and optimal monetary policy

We build quadratic labor adjustment costs into an otherwise standard New-Keynesian model of the business cycle and show that this increases output persistence in a similar vein as other models of labor market frictions. Furthermore, it is demonstrated that quadratic labor adjustment costs imply a trade off between stabilizing output and stabilizing inflation.

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Year of publication:	2011
Authors:	Lechthaler, Wolfgang ; Snower, Dennis J.
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	Preisrigidität \| Arbeitsmarkt \| Anpassungskosten \| Neoklassische Synthese \| Konjunkturtheorie \| Theorie \| Monetary Persistence \| Labor Adjustment Costs \| Optimal Monetary Policy

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Series:	Kiel Working Paper ; 1453 [rev.]
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	857025864 [GVK] hdl:10419/130554 [Handle] RePEc:zbw:ifwkwp:1453r [RePEc]
Classification:	E24 - Employment; Unemployment; Wages ; E32 - Business Fluctuations; Cycles ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
Source:	EconStor

Persistent link: https://www.econbiz.de/10011453723