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Interacting nominal and real labour market rigidities

Vogel, Lukas (2008): Interacting nominal and real labour market rigidities.

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Abstract

This note analyses the interaction between nominal wage stickiness and costly employment adjustment in a small closed-economy New Keynesian model with simple rule-based or optimal monetary policy. The results show (1) the costs of nominal and real rigidity to depend on the policy regime, (2) optimal policy to substantially contain the welfare loss, and (3) the absence of quantitatively important second-best interaction, suggesting that reducing rigidity along one dimension alone does not risk reducing overall welfare.

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  • Interacting nominal and real labour market rigidities. (deposited 11. May 2010 19:09) [Currently Displayed]
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