Labor mobility in a monetary union
Daniela Hauser () and
Journal of International Economics, 2022, vol. 137, issue C
Internal migration flows are endogenously driven by relative labor market performance in a New Keynesian DSGE model of a monetary union calibrated to U.S. data. When labor markets are competitive, a strict focus on stabilizing unionwide inflation remains close to optimal. With search and matching frictions in regional labor markets, labor mobility across state borders introduces additional trade-offs for optimal monetary policy since workers do not internalize the full effects of their individual migration decisions. But when monetary policy is suboptimal, a mobile labor force helps to close inefficiency gaps in regional labor markets following region-specific shocks. Putting some weight on labor market outcomes in a simple instrument rule enhances welfare more when labor is mobile.
Keywords: Labor mobility; Monetary policy; Monetary union; Business cycles (search for similar items in EconPapers)
JEL-codes: E32 E52 F45 (search for similar items in EconPapers)
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Working Paper: Labor Mobility in a Monetary Union (2019)
Working Paper: Labor mobility in a monetary union (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:137:y:2022:i:c:s0022199622000320
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