Replication data for: Welfare-Based Optimal Monetary Policy with Unemployment and Sticky Prices: A Linear-Quadratic Framework

Principal Investigator(s): View help for Principal Investigator(s) Federico Ravenna; Carl E. Walsh

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AEJMacro_2009-0213_prgs_final			10/12/2019 09:08:PM
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Project Citation:

Ravenna, Federico, and Walsh, Carl E. Replication data for: Welfare-Based Optimal Monetary Policy with Unemployment and Sticky Prices: A Linear-Quadratic Framework. Nashville, TN: American Economic Association [publisher], 2011. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114196V1

Project Description

Summary: We derive a linear-quadratic model that is consistent with sticky prices and search and matching frictions in the labor market. We show that the second-order approximation to the welfare of the representative agent depends on inflation and "gaps" that involve current and lagged unemployment. Our approximation makes explicit how welfare costs are generated by the presence of search frictions. These costs are distinct from the costs associated with relative price dispersion and fluctuations in consumption that appear in standard new Keynesian models. We show the labor market structure has important implications for optimal monetary policy. (JEL E24, E31, E52)

Scope of Project

JEL Classification:
      E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
      E31 Price Level; Inflation; Deflation
      E52 Monetary Policy

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V1 [2019-10-12]

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