Faia, Ester; Lechthaler, Wolfgang; Merkl, Christian - 2009
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 …