Heterogeneous-agent New Keynesian models with sticky nominal wages usually assume that wage-setting unions demand the same amount of hours from all households. As a result, unions do not take account of the fact that (i) households are heterogeneous in their willingness to work, and that (ii)...

Following the Covid-19 pandemic, U.S. labor force participation declined significantly in 2020, slowly recovering in 2021 and 2022 -- this has been referred to as the Great Resignation. The decline has been concentrated among older Americans. By 2022, the labor force participation of workers in...

Persistent unemployment after recessions and the policies required to bring it down are the subject of an ongoing debate. One view suggests there are fundamental changes in the labor market that imply a long-term higher rate of unemployment, requiring the implementation of structural policy...

We empirically analyze the effect of policy of the Federal Reserve on the US labor market using the PSID data set. We find that an increase in the federal funds rate decreases the probability that an individual is unemployed. Survival analysis indicates that a rise in the federal funds rate will...

Should monetary policy offset the effects of labor supply shocks on inflation and the output gap? Canonical New Keynesian models answer yes. Motivated by weak labor force participation during the pandemic, we reexamine the question by introducing labor force entry and exit in an otherwise...

This paper calculates the cost of an unemployment shock in terms of family welfare for married and single families separately and by education level. We find that, overall, families face an average annualized expected dollar equivalent welfare loss of $1,156 when the unemployment rate rises by 1...

Monetary policy is conventionally understood to influence labor demand, with little effect on labor supply. We estimate the response of labor market flows to high-frequency changes in interest rates around FOMC announcements and Fed Chair speeches and find that, in contrast to the consensus...

The Lucas critique has exposed the problem of the trade-off between changes in monetary policy and structural breaks in economic time series. The search for and characterisation of such breaks has been a major econometric task ever since. We have developed an integral technique similar to CUSUM...

In this paper we re-consider the effects of monetary policy shocks on exchange rates and forward premia. In the recent empirical literature, these effects have been predominantly described as puzzling, in that they would include delayed overshooting of the exchange rate as well as persistent...

In this paper, we study the influence of central bank transparency and informal central bank communication on the money market adjustment process between two interest rate decisions. The sample covers nine major central banks for the period from January 1999 to July 2007. We find, first, that...