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Labor Market Participation, Unemployment and Monetary Policy

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  • Alessia Campolmi
  • Stefano Gnocchi

Abstract

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.

Suggested Citation

  • Alessia Campolmi & Stefano Gnocchi, 2014. "Labor Market Participation, Unemployment and Monetary Policy," Staff Working Papers 14-9, Bank of Canada.
    • Handle: RePEc:bca:bocawp:14-9
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    More about this item

    Keywords

    Business fluctuations and cycles; Labour markets; Transmission of monetary policy;
    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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