A model for monetary policy analysis

federal reserve

Research published by the San Francisco Federal Reserve shows that including search frictions and unemployment in a model with staggered price adjustment preserves some of the monetary policy results common to new Keynesian models.

Search frictions in the labour market affect the goals of the policy maker and change the monetary transmission mechanism by adding a cost channel to the traditional demand channel.

In general, the presence of labour market frictions reduces the difference between

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