FAIA, ESTER; LECHTHALER, WOLFGANG; MERKL, CHRISTIAN - In: Journal of Money, Credit and Banking 46 (2014) 1, pp. 115-144
We study optimal monetary policy and welfare properties of a dynamic stochastic general equilibrium (DSGE) model with a labor selection process, labor turnover costs, and Nash bargained wages. We show that our model implies inefficiencies that cannot be offset in a standard wage bargaining...