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Monetary Rules and Sectoral Unemployment in Open Economies

  • William D. Craighead


    (Department of Economics, Wesleyan University)

This paper incorporates a search-and-matching model of the labor market into a “New Open Economy Macroeconomics” framework. This allows for an examination of the behavior of tradable and nontradable sector unemployment rates under alternative monetary rules. An examination of dynamics in response to shocks to productivity, world prices and interest rates, and foreign demand suggests that monetary rules that respond to prices of domestic output rather than consumer prices may be better able to stabilize unemployment.

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Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2012-001.

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Length: 25 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:wes:weswpa:2012-001
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