Efficiency of short-time work schemes and the role of monetary policy

Stefan Wilhelm

Journal of Macroeconomics, 2023, vol. 78, issue C

Abstract: This paper examines the relationship between the utilization of short-time work, inflation dynamics and monetary policy. Using a New Keynesian general equilibrium model with search and matching frictions, this study is a first to point out that short-time work can give rise to deflationary tendencies which may impact its efficacy, contingent on the monetary environment. While aggressive inflation targeting supports the stabilizing employment effects of short-time work, only little stabilization is observed when monetary policy is constrained by the zero lower bound. Our analysis also indicates that expanding the eligibility criteria may not deliver additional stabilization, whilst lowering the costs of short-time work could enhance employment even more.

Keywords: DSGE; Inflation; Short-time work; Zero lower bound; Labor market (search for similar items in EconPapers)
JEL-codes: E24 E62 J08 J63 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:78:y:2023:i:c:s0164070423000654

DOI: 10.1016/j.jmacro.2023.103565

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