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Labor Market Participation, Unemployment and Monetary Policy

Listed author(s):
  • 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
Handle: RePEc:bca:bocawp:14-9
Contact details of provider: Postal:
234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada

Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/

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  3. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
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  13. Morten O. Ravn, 2008. "The Consumption-Tightness Puzzle," NBER Chapters,in: NBER International Seminar on Macroeconomics 2006, pages 9-63 National Bureau of Economic Research, Inc.
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  22. 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.
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  24. Monacelli, Tommaso & Perotti, Roberto & Trigari, Antonella, 2010. "Unemployment fiscal multipliers," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 531-553, July.
  25. Krause, Michael U. & Lubik, Thomas A., 2007. "The (ir)relevance of real wage rigidity in the New Keynesian model with search frictions," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 706-727, April.
  26. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
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  29. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  30. Sveen, Tommy & Weinke, Lutz, 2008. "New Keynesian perspectives on labor market dynamics," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 921-930, July.
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