Welfare-based optimal monetary policy with unemployment and sticky prices: A linear-quadratic framework
University of California, Santa Cruz
New Keynesian DSGE model with Mortensen-Pissarides search and matching frictions in the labor market, Calvo sticky prices in retail sector, Nash wage bargaining with stochastic bargaining shares, and home production for unemployed workers
wholesale firms: competitive market, CRS production with labor, search frictions for hiring; retail firms: monopolistic competition, Calvo pricing, CRS transformation of wholesale goods
Table 2
Standard NK loss function minimizing inflation and consumption gap under commitment