A new approach for introducing unemployment into the New Keynesian framework. …cover -- Contents -- Series Foreword -- Preface -- Introduction -- A Simple Model of Unemployment and Inflation … Dynamics -- Unemployment, the Output Gap, and the Welfare Costs of Economic Fluctuations -- Unemployment and Monetary Policy …

"We construct a utility-based model of fluctuations, with nominal rigidities and unemployment, and draw its … implications for the unemployment-inflation tradeoff and for the conduct of monetary policy.We proceed in two steps. We first leave … unemployment in the constrained efficient allocation. We then focus on the implications of alternative real wage setting mechanisms …