Sectoral Labor Mobility and Optimal Monetary Policy

Author/Editor:

Alessandro Cantelmo ; Giovanni Melina

Publication Date:

March 6, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

In an estimated two-sector New-Keynesian model with durable and nondurable goods, an inverse relationship between sectoral labor mobility and the optimal weight the central bank should attach to durables inflation arises. The combination of nominal wage stickiness and limited labor mobility leads to a nonzero optimal weight for durables inflation even if durables prices were fully flexible. These results survive alternative calibrations and interestrate rules and point toward a non-negligible role of sectoral labor mobility for the conduct of monetary policy.

Series:

Working Paper No. 17/40

Subject:

English

Publication Date:

March 6, 2017

ISBN/ISSN:

9781475584783/1018-5941

Stock No:

WPIEA2017040

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

33

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