Unemployment fluctuations and stabilization policies
Subtitle: a new Keynesian perspective
By: Jordi Galí
Series: Zeuthen lecture book series; Zeuthen lecture book series
Publisher: MIT Press
Published: 2011
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 106
ISBN-13: 9780262015974
Subjects: Monetary policy; Government policy; Keynesian economics; Unemployment
Description: The past fifteen years have witnessed the rise of the New Keynesian model as a framework of reference for the analysis of fluctuations and stabilization policies. That framework, which combines the rigor and internal consistency of dynamic general equilibrium models with such typically Keynesian assumptions as monopolistic competition and nominal rigidities, makes possible a meaningful, welfare-based analysis of the effects of monetary policy rules. But the conspicuous absence of unemployment from the standard New Keynesian model has given rise to both criticism and attempts to rectify this anomaly. In this book, Jordi Galí, one of the major contributors to the New Keynesian literature, offers a new approach to introducing unemployment into that framework. Galí's approach involves a reinterpretation of the labor market in the standard New Keynesian model with staggered wage setting (rather than a modification or extension of the model, as has been proposed by others). The resulting framework preserves the convenience of the representative household paradigm and allows one to determine the equilibrium levels of employment, the labor force, and hence the unemployment rate conditional on the monetary policy in place. Galí develops the basic model, embedding it in a standard New Keynesian framework with staggered price and wage setting; revisits the relationship between economic fluctuations and efficiency through the lens of the new model, developing a measure of the output gap; and analyzes the relation between unemployment and the design of monetary policy. -- Book Description.
Notes: Includes bibliographical references and index.
Table of contents: title: A simple model of unemployment and inflation dynamics; title: Unemployment, the output gap, and the welfare costs of economic fluctuations; title: Unemployment and monetary policy design in the new Keynesian model; title: Concluding remarks and directions for future research.