TY  - RPRT
A1  - Faia, Ester
T1  - Ramsey monetary policy with labour market frictions : [This draft: March 2009]
N2  - Traditional New Keynesian models prescribe that optimal monetary policy should aim at price stability. In the absence of a labor market frictions, the monetary authority faces no unemployment/inflation trade-off. I study the design of optimal monetary policy in a framework with sticky prices and matching frictions in the labor market. Optimal policy features deviations from price stability in response to both productivity and government expenditure shocks. When the Hosios 1990 condition is not met, search externalities make the flexible price allocation unfeasible. Optimal deviations from price stability increase with workers’ bargaining power, as firms´ incentives to post vacancies fall and unemployment fluctuates above the Pareto efficient one.
KW  - optimal monetary policy
KW  - matching frictions
KW  - congestion externality
Y1  - 2009
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/35664
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-356649
UR  - http://www.wiwi.uni-frankfurt.de/profs/faia/welcome_files/jme_ramsey_3ndrevisedr.pdf
N1  - First draft: August 2006. This draft: March 2009
IS  - draft: March 2009
ER  -