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Optimal monetary policy in economies with dual labor markets

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Optimal monetary policy in economies with dual labor markets. / Mattesini, F.; Rossi, L.
In: Journal of Economic Dynamics and Control, Vol. 33, No. 7, 31.07.2009, p. 1469-1489.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Mattesini, F & Rossi, L 2009, 'Optimal monetary policy in economies with dual labor markets', Journal of Economic Dynamics and Control, vol. 33, no. 7, pp. 1469-1489. https://doi.org/10.1016/j.jedc.2009.01.008

APA

Mattesini, F., & Rossi, L. (2009). Optimal monetary policy in economies with dual labor markets. Journal of Economic Dynamics and Control, 33(7), 1469-1489. https://doi.org/10.1016/j.jedc.2009.01.008

Vancouver

Mattesini F, Rossi L. Optimal monetary policy in economies with dual labor markets. Journal of Economic Dynamics and Control. 2009 Jul 31;33(7):1469-1489. Epub 2009 Feb 28. doi: 10.1016/j.jedc.2009.01.008

Author

Mattesini, F. ; Rossi, L. / Optimal monetary policy in economies with dual labor markets. In: Journal of Economic Dynamics and Control. 2009 ; Vol. 33, No. 7. pp. 1469-1489.

Bibtex

@article{cf0f3ad33017445fa099470f8e4f4324,
title = "Optimal monetary policy in economies with dual labor markets",
abstract = "We present a dynamic stochastic general equilibrium (DSGE) New Keynesian model with indivisible labor and a dual labor market: a Walrasian one where wages are fully flexible and a unionized one characterized by real wage rigidity. We show that the negative effect of a productivity shock on inflation and the positive effect of a cost-push shock are crucially determined by the proportion of firms that belong to the unionized sector. The larger this number, the larger are these effects. Consequently, the larger the union coverage, the larger should be the optimal response of the nominal interest rate to exogenous productivity and cost-push shocks. The optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases. ",
keywords = "Optimal monetary policy, Real wage rigidity, Taylor rules, Trade-unions",
author = "F. Mattesini and L. Rossi",
year = "2009",
month = jul,
day = "31",
doi = "10.1016/j.jedc.2009.01.008",
language = "English",
volume = "33",
pages = "1469--1489",
journal = "Journal of Economic Dynamics and Control",
issn = "0165-1889",
publisher = "Elsevier",
number = "7",

}

RIS

TY - JOUR

T1 - Optimal monetary policy in economies with dual labor markets

AU - Mattesini, F.

AU - Rossi, L.

PY - 2009/7/31

Y1 - 2009/7/31

N2 - We present a dynamic stochastic general equilibrium (DSGE) New Keynesian model with indivisible labor and a dual labor market: a Walrasian one where wages are fully flexible and a unionized one characterized by real wage rigidity. We show that the negative effect of a productivity shock on inflation and the positive effect of a cost-push shock are crucially determined by the proportion of firms that belong to the unionized sector. The larger this number, the larger are these effects. Consequently, the larger the union coverage, the larger should be the optimal response of the nominal interest rate to exogenous productivity and cost-push shocks. The optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases.

AB - We present a dynamic stochastic general equilibrium (DSGE) New Keynesian model with indivisible labor and a dual labor market: a Walrasian one where wages are fully flexible and a unionized one characterized by real wage rigidity. We show that the negative effect of a productivity shock on inflation and the positive effect of a cost-push shock are crucially determined by the proportion of firms that belong to the unionized sector. The larger this number, the larger are these effects. Consequently, the larger the union coverage, the larger should be the optimal response of the nominal interest rate to exogenous productivity and cost-push shocks. The optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases.

KW - Optimal monetary policy

KW - Real wage rigidity

KW - Taylor rules

KW - Trade-unions

U2 - 10.1016/j.jedc.2009.01.008

DO - 10.1016/j.jedc.2009.01.008

M3 - Journal article

VL - 33

SP - 1469

EP - 1489

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

IS - 7

ER -