Interacting nominal and real labour market rigidities

Lukas Vogel

MPRA Paper from University Library of Munich, Germany

Abstract: This note analyses the interaction between nominal wage stickiness and costly employment adjustment in a small closed-economy New Keynesian model with simple rule-based or optimal monetary policy. The results show (1) the costs of nominal and real rigidity to depend on the policy regime, (2) optimal policy to substantially contain the welfare loss, and (3) the absence of quantitatively important second-best interaction, suggesting that reducing rigidity along one dimension alone does not risk reducing overall welfare.

Keywords: wage stickiness; employment adjustment costs; second best (search for similar items in EconPapers)
JEL-codes: E24 E32 J20 J30 (search for similar items in EconPapers)
Date: 2008-11, Revised 2010-05
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Related works:
Journal Article: Interacting nominal and real labour market rigidities (2011)
Working Paper: Interacting nominal and real labour market rigidities (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:22647

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