Quadratic labor adjustment costs, business cycle dynamics and optimal monetary policy

Wolfgang Lechthaler and Dennis J. Snower

No 1453 [rev.], Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: We build quadratic labor adjustment costs into an otherwise standard New-Keynesian model of the business cycle and show that this increases output persistence in a similar vein as other models of labor market frictions. Furthermore, it is demonstrated that quadratic labor adjustment costs imply a trade off between stabilizing output and stabilizing inflation.

Keywords: Monetary Persistence; Labor Adjustment Costs; Optimal Monetary Policy (search for similar items in EconPapers)
JEL-codes: E24 E32 E52 J23 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: QUADRATIC LABOR ADJUSTMENT COSTS, BUSINESS CYCLE DYNAMICS, AND OPTIMAL MONETARY POLICY (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1453r

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