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Sectoral Labor Mobility and Optimal Monetary Policy

Author

Listed:
  • Mr. Alessandro Cantelmo
  • Mr. Giovanni Melina

Abstract

In an estimated two-sector New-Keynesian model with durable and nondurable goods, an inverse relationship between sectoral labor mobility and the optimal weight the central bank should attach to durables inflation arises. The combination of nominal wage stickiness and limited labor mobility leads to a nonzero optimal weight for durables inflation even if durables prices were fully flexible. These results survive alternative calibrations and interestrate rules and point toward a non-negligible role of sectoral labor mobility for the conduct of monetary policy.

Suggested Citation

  • Mr. Alessandro Cantelmo & Mr. Giovanni Melina, 2017. "Sectoral Labor Mobility and Optimal Monetary Policy," IMF Working Papers 2017/040, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/040
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    Cited by:

    1. Aditya Khemka & Christina Laskaridis & Dimitrios P. Tsomocos, 2025. "Climate change macroprudential policy responses and their distributional consequences in South Africa," Working Papers 11090, South African Reserve Bank.
    2. Lis, Eliza & Nickel, Christiane & Papetti, Andrea, 2020. "Demographics and inflation in the euro area: a two-sector new Keynesian perspective," Working Paper Series 2382, European Central Bank.

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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