We study the design of optimal monetary policy in a New Keynesian model with labor turnover costs in which wages are … coexistence of those types of labor market frictions alongside with sticky prices gives rise to a non-trivial trade-off for the … 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 … coexistence of those types of labor market frictions alongside with sticky prices gives rise to a non-trivial trade-off for the … zero and the optimal volatility of inflation is an increasing function of firing costs. The optimal rule should react to …

model, incorporating labor market frictions in the form of hiring and firing costs. We show that such a model is able to … the standard search and matching model. -- monetary persistence ; labor market ; hiring and firing costs …