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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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File URL: http://www.bankofcanada.ca/wp-content/uploads/2014/03/wp2014-9.pdf
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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
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Web page: http://www.bank-banque-canada.ca/

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  18. Monacelli, Tommaso & Perotti, Roberto & Trigari, Antonella, 2010. "Unemployment fiscal multipliers," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 531-553, July.
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  20. Carl E. Walsh, 2005. "Labor Market Search, Sticky Prices, and Interest Rate Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 829-849, October.
  21. Antonella Trigari, 2006. "The Role of Search Frictions and Bargaining for Inflation Dynamics," Working Papers 304, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  22. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
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  24. Krusell, Per & Mukoyama, Toshihiko & Rogerson, Richard & Sahin, Aysegul, 2009. "Aggregate Labor Market Outcomes: The Role of Choice and Chance," CEPR Discussion Papers 7435, C.E.P.R. Discussion Papers.
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  26. Regis Barnichon & Andrew Figura, 2010. "What drives movements in the unemployment rate? a decomposition of the Beveridge curve," Finance and Economics Discussion Series 2010-48, Board of Governors of the Federal Reserve System (U.S.).
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  28. Barnichon, Regis, 2010. "Building a composite Help-Wanted Index," Economics Letters, Elsevier, vol. 109(3), pages 175-178, December.
  29. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
  30. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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