Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144474
Authors: 
Dossche, Maarten
Lewis, Vivien
Poilly, Céline
Year of Publication: 
2014
Series/Report no.: 
Working Paper Research 262
Abstract: 
We characterize optimal monetary policy in a New Keynesian search-and-matching model where multiple-worker firms satisfy demand in the short run by adjusting hours per worker. Imperfect product market competition and search frictions reduce steady state hours per worker below the efficient level. Bargaining results in a convex ‘wage curve’ linking wages to hours. Since the steadystate real marginal wage is low, wages respond little to hours. As a result, firms overuse the hours margin at the expense of hiring, which makes hours too volatile. The Ramsey planner uses inflation as an instrument to dampen inefficient hours fluctuations.
Subjects: 
employment
hours
wage curve
optimal monetary policy
JEL: 
E30
E50
E60
Document Type: 
Working Paper

Files in This Item:
File
Size
381.25 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.