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Efficiency of short-time work schemes and the role of monetary policy

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  • Wilhelm, Stefan

Abstract

This paper examines the relationship between the utilization of short-time work, inflation dynamics and monetary policy. Using a New Keynesian general equilibrium model with search and matching frictions, this study is a first to point out that short-time work can give rise to deflationary tendencies which may impact its efficacy, contingent on the monetary environment. While aggressive inflation targeting supports the stabilizing employment effects of short-time work, only little stabilization is observed when monetary policy is constrained by the zero lower bound. Our analysis also indicates that expanding the eligibility criteria may not deliver additional stabilization, whilst lowering the costs of short-time work could enhance employment even more.

Suggested Citation

  • Wilhelm, Stefan, 2023. "Efficiency of short-time work schemes and the role of monetary policy," Journal of Macroeconomics, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:jmacro:v:78:y:2023:i:c:s0164070423000654
    DOI: 10.1016/j.jmacro.2023.103565
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    More about this item

    Keywords

    DSGE; Inflation; Short-time work; Zero lower bound; Labor market;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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