This paper reviews recent approaches to modeling the labour market, and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage...

We study the properties of optimal monetary policy in an environment of nominal wage rigidity and unemployment. We show that nominal wage rigidity increases the sacrifice ratio, and therefore reduces the effectiveness of sacrificing employment in order to stabilize inflation. It follows that in...

This paper developes a New Keynesian (NK) model that incorporates standard search and matching structure with firing costs. I analyze how labor market institutions affect the macroeconomic dynamics, in particular, wage and inflation dynamics. I particularly look at two important labor market...

In this paper we incorporate a labor market with matching frictions and wage rigidities into the New Keynesian business cycle model. In particular, we analyze the effect of a monetary policy shock and investigate how labor market frictions affect the transmission process of monetary policy. The...

This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage...