macroeconomic volatilities. In our subsequent empirical estimations, we find that higher labor turnover costs have a statistically …

We study the design of optimal monetary policy in a New Keynesian model with labor turnover costs in which wages are … zero and the optimal volatility of inflation is an increasing function of firing costs. The optimal rule should react to …

introduction of labor turnover costs (such as hiring and firing costs). Assuming that it is costly to hire and fire workers implies …