Job Destruction and Monetary Policy
نویسنده
چکیده
In this paper, a simple search model of the labor market is combined with a cash-in-advance model of a monetary economy. Changes in the nominal rate of interest alter the job destruction margin, and persistent rate changes generate hump shaped responses of employment and income similar to those observed in the data. The model is used to study optimal monetary policy under both commitment and discretion. JEL: E52, E58 ∗Department of Economics, SS1, University of California, Santa Cruz, CA 95064, [email protected]. I would like to thank seminar participants at UC Davis and UCSB for helpful comments on earlier versions of this research.
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