Skip to main navigation Skip to main content Skip to page footer
WWT3 Sitepackage WWT3 Sitepackage

Journal Article

Quadratic Labor Adjustment Costs, Business Cycle Dynamics and Optimal Monetary Policy

Macroeconomic Dynamics
Download

Authors

  • Lechthaler
  • W.
  • Snower
  • D.J.

Publication Date

JEL Classification

E24 E32 E52 J23

Key Words

Labor Adjustment Costs

Monetary Persistence

Optimal Monetary Policy

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.

Kiel Institute Expert

  • Prof. Dennis J. Snower, Ph.D.
    President Emeritus

More Publications

Topics

  • Aerial view of an African village, solar-powered well in the center

    © Prabuddha / Adobe Stock

    Africa

  • man on street

    © Christie Kim on Unsplash

    China

  • Two women inspect a solar panel

    © Stefano Paltera / U.S. Dep. ESD, CC BY-ND 2.0

     

    Climate and Energy

Research Center

  • Research Center

    Macroeconomics

Cookie Extension Logo