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Labor Market Participation, Unemployment and Monetary Policy

  • Alessia Campolmi
  • Stefano Gnocchi

We incorporate a participation decision in a standard New Keynesian model with matching frictions and show that treating the labor force as constant leads to incorrect evaluation of alternative policies. We also show that the presence of a participation margin mitigates the Shimer critique.

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Paper provided by Bank of Canada in its series Staff Working Papers with number 14-9.

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Length: 59 pages
Date of creation: 2014
Date of revision:
Handle: RePEc:bca:bocawp:14-9
Contact details of provider: Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
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  19. Ch. Pissarides., 2011. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
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  23. Per Krusell & Toshihiko Mukoyama & Richard Rogerson & Ayşegül Şahin, 2010. "Aggregate labor market outcomes: The roles of choice and chance," Quantitative Economics, Econometric Society, vol. 1(1), pages 97-127, 07.
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