Search Frictions, Job Flows and Optimal Monetary Policy
Job creation and job destruction are investigated in an economy featured by search frictions in both labour and goods markets. We show that both the unemployment rate and the endogenous job destruction rate increase when the inflation rate rises, because the demand declines due to the increase in the cost of holding money. Our numerical exercises suggest that the destruction of lower productivity jobs and the creation of higher productivity jobs may be inefficiently low under the zero nominal interest rate, which in turn causes the deviation of optimal long run monetary policy from the Friedman rule.
|Date of creation:||12 Mar 2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 01334 462420
Fax: 01334 462444
Web page: http://www.st-andrews.ac.uk/cdma
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shi Shouyong, 1997.
"Search for a Monetary Propagation Mechanism,"
966, Queen's University, Department of Economics.
- Shouyong Shi, 1997.
"A Divisible Search Model of Fiat Money,"
Econometric Society, vol. 65(1), pages 75-102, January.
- Shouyong Shi, 1995.
"Money and Prices: A Model of Search and Bargaining,"
916, Queen's University, Department of Economics.
- Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
- Aleksander Berentsen & Guillaume Rocheteau & Shouyong Shi, 2007.
"Friedman Meets Hosios: Efficiency in Search Models of Money,"
Royal Economic Society, vol. 117(516), pages 174-195, 01.
- Aleksander Berentsen & Guillaume Rocheteau & Shouyong Shi, . "Friedman Meets Hosios: Efficiency in Search Models of Money," IEW - Working Papers 154, Institute for Empirical Research in Economics - University of Zurich.
- Aleksander Berentsen & Guillaume Rocheteau & Shouyong Shi, 2002. "Friedman Meets Hosios: Efficiency in Search Models of Money," Working Papers shouyong-02-04, University of Toronto, Department of Economics.
- Aleksander Berentsen & Guillaume Rocheteau & Shouyong Shi, 2004. "Friedman meets Hosios: efficiency in search models of money," Working Paper 0408, Federal Reserve Bank of Cleveland.
- Sveen, Tommy & Weinke, Lutz, 2008. "New Keynesian perspectives on labor market dynamics," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 921-930, July.
- Nobuhiro Kiyotaki & Randall Wright, 1989.
"A contribution to the pure theory of money,"
123, Federal Reserve Bank of Minneapolis.
- Olivier Blanchard & Jordi Galí, 2010.
"Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment,"
American Economic Journal: Macroeconomics,
American Economic Association, vol. 2(2), pages 1-30, April.
- Blanchard, Olivier J & Galí, Jordi, 2008. "Labour Markets and Monetary Policy: A New Keynesian Model with Unemployment," CEPR Discussion Papers 6765, C.E.P.R. Discussion Papers.
- Olivier Blanchard & Jordi Galí, 2006. "Labor markets and monetary policy: A new-Keynesian model with unemployement," Economics Working Papers 1076, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2008.
- Olivier Blanchard & Jordi Gali, 2008. "Labor Markets and Monetary Policy: A New-Keynesian Model with Unemployment," NBER Working Papers 13897, National Bureau of Economic Research, Inc.
- Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
- Shouyong Shi, 2006. "Viewpoint: A microfoundation of monetary economics," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 643-688, August.
- Mortensen, Dale T & Pissarides, Christopher A, 1994.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(3), pages 397-415, July.
- Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
- Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
- Alok Kumar, 2013. "Labor Markets, Unemployment and Optimal Inflation," Department Discussion Papers 1303, Department of Economics, University of Victoria.
When requesting a correction, please mention this item's handle: RePEc:san:cdmawp:1402. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bram Boskamp)
If references are entirely missing, you can add them using this form.