Wage-Price Adjustments, Labor Market Frictions and Monetary Policy

Christian Proaño
Written By SCEPA

WORKING PAPER

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In this paper the author models the existence of labour market frictions into a Keynesian AS-AD framework through a labour search and matching function.

By means of dynamic shock simulations, the author finds that the extent of the labour market rigidity has a great importance for the dynamics not only of employment and output, but also of wage and price inflation, and consequently also for the conduction of monetary policy.

SCEPA
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