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 … employment alongside inflation. -- Optimal monetary policy ; hiring and firing costs ; labor market frictions ; policy trade-off …

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

macroeconomic volatilities. In our subsequent empirical estimations, we find that higher labor turnover costs have a statistically … ; macroeconomic volatility ; monetary policy ; firing costs ; unemployment benefits ; replacement rate …

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 …

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