The effectiveness of labor market indicators for conducting monetary policy: Evidence from the Korean economy

Hangyu Lee and Tae Bong Kim

Economic Modelling, 2023, vol. 118, issue C

Abstract: The effectiveness of labor market indicators for monetary policy has not yet been theoretically established despite their practical significance to practitioners. To bridge the gap between theory and practice, this paper investigates whether labor market indicators may improve the efficiency of monetary policy implementation by providing the monetary authority with timely information about current economic conditions. To this end, a small open macroeconomic model with endogenous involuntary unemployment is constructed, estimated, and simulated based on the Korean economy. We find that a monetary policy rule augmented by labor market indicators outperforms one using a conventional output gap in terms of social welfare.

Keywords: Labor market indicators; Unemployment; Monetary policy; Welfare analysis; Korean economy; New Keynesian dynamic general equilibrium (DSGE) model (search for similar items in EconPapers)
JEL-codes: E24 E32 E52 F41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999322003352
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:118:y:2023:i:c:s0264999322003352

DOI: 10.1016/j.econmod.2022.106098

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().