Journal Article
Quadratic Labor Adjustment Costs, Business Cycle Dynamics and Optimal Monetary Policy
Macroeconomic Dynamics
Autoren
Erscheinungsdatum
JEL Classification
E24
E32
E52
J23
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, we demonstrate the implication of quadratic labor adjustment costs for monetary policy. We show that there is a simple rule determining whether quadratic labor adjustment costs imply a trade-off between stabilizing inflation and output.
