We build quadratic labor adjustment costs into an otherwise standard New-Keynesian model of the business cycle and show that this is sufficient to increase both, output and inflation persistence. -- Monetary persistence ; labor adjustment costs

This paper challenges what is the standard account of UK unemployment, namely that the major swings in unemployment over the past 25 years are due predominantly to movements in the underlying empirical “natural rate of unemployment” (NRU). Our analysis suggests that the British NRU has...