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Sectoral Labor Mobility and Optimal Monetary Policy

Giovanni Melina () and Alessandro Cantelmo ()

No 2017/040, IMF Working Papers from International Monetary Fund

Abstract: In an estimated two-sector New-Keynesian model with durable and nondurable goods, an inverse relationship between sectoral labor mobility and the optimal weight the central bank should attach to durables inflation arises. The combination of nominal wage stickiness and limited labor mobility leads to a nonzero optimal weight for durables inflation even if durables prices were fully flexible. These results survive alternative calibrations and interestrate rules and point toward a non-negligible role of sectoral labor mobility for the conduct of monetary policy.

Keywords: WP; durable goods; Optimal monetary policy; labor mobility; DSGE; nondurable goods; monetary policy rule; durables inflation; sectoral price markup shock; inflation composite; substitution durable goods; monetary policy stance; costs durable goods; Inflation; Sticky prices; Wages (search for similar items in EconPapers)
Pages: 33
Date: 2017-03-06
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Related works:
Working Paper: Sectoral Labor Mobility and Optimal Monetary Policy (2020) Downloads
Working Paper: Sectoral Labor Mobility and Optimal Monetary Policy (2020) Downloads
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