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Labor Market Frictions and Monetary Policy Design

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  • Anna Almosova

Abstract

This paper estimates a New Keynesian DSGE model with search frictions and monetary rules augmented with di erent labor market indicators. In accordance with a theoretical literature I nd that a central bank reacts to a labor market tightness, employment or unemployment. Posterior odds tests speak in favor of models with augmented Taylor rules versus a model with a model with a standard rule. The augmented rules were also shown to be more ecient in terms of welfare.

Suggested Citation

  • Anna Almosova, 2016. "Labor Market Frictions and Monetary Policy Design," SFB 649 Discussion Papers SFB649DP2016-054, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2016-054
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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