zero and the optimal volatility of inflation is an increasing function of firing costs. The optimal rule should react to …We study the design of optimal monetary policy in a New Keynesian model with labor turnover costs in which wages are … state contingent inflation taxes/subsidies to smooth those rents. Hence, in the optimal Ramsey plan, inflation deviates from …

- although they generate price inertia, they cannot account for the stylised fact of inflation persistence. It is thus commonly … asserted that, in the context of the new Phillips curve (NPC), inflation is a jump variable. We argue that this persistency … puzzle is highly misleading, relying on the exogeneity of the forcing variable (e.g. output gap, marginal costs, unemployment …

Keynesian model we show that, if households have hyperbolic discounting, small positive rates of inflation can be optimal. In … our baseline calibration, the optimal rate of inflation is 2.1% and remains positive across a wide range of calibrations …

contracts and positive inflation. Workers with relatively low incomes experience envy, whereas those with relatively high … incomes experience guilt. The former seek to raise their income, and latter seek to reduce it. The greater the inflation rate …, a rise in the inflation rate leads workers to supply more labor over the contract period, generating a significant …

This paper analyzes the effects of different labor market institutions on inflation and output volatility. The eurozone … macroeconomic volatilities. In our subsequent empirical estimations, we find that higher labor turnover costs have a statistically … theory. While labor market institutions have a large effect on output volatility, they do not seem to have much of an effect …

and real wage rigidities. In our analysis, we focus on the differentials in inflation and unemployment between countries … inflation and unemployment differentials. Second, we find that asymmetries in labor market structures tend to increase the … volatility of both inflation and unemployment differentials. Finally, we show that it is important to take into account the …

consensus is that real wage rigidities can be a useful mechanism to induce the inflation persistence that is absent in the … account, the results change dramatically, both qualitatively and quantitatively. Real wage rigidities imply neither inflation … persistence, nor output costs of disinflations. Real wage rigidities actually create a boom after a permanent reduction in the …

reaction theory (CRT), should be used to jointly explain the evolution of inflation and unemployment. A further attraction of …The conventional wisdom that inflation and unemployment are unrelated in the long-run implies the compartmentalisation … of macroeconomics. While one branch of the literature models inflation dynamics and estimates the unemployment rate …