Monetary policy and unemployment in open economies
Engler, Philipp ;  ;  Universität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft

Main titleMonetary policy and unemployment in open economies
AuthorEngler, Philipp
InstitutionUniversität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft
No. of Pages35 S.
Series ; 2011,24 : Economics
KeywordsOpen economy macroeconomics; monetary policy; unemployment
Classification (DDC)337 International economics
AbstractAfter an expansionary monetary policy shock employment increases and unemployment falls. In standard New Keynesian models the fall in aggregate unemployment does not affect employed workers at all. However, Lüchinger, Meier and Stutzer (2010) found that the risk of unemployment negatively affects utility of employed workers: An increases in aggregate unemployment decreases workers' subjective well-being, which can be explained by an increased risk of becoming unemployed. I take account of this effect in an otherwise standard New Keynesian open economy model with unemployment as in Galí (2010) and …nd two important results with respect to expansionary monetary policy shocks: First, the usual wealth effect in New Keynesian models of a declining labor force, which is at odds with the data as highlighted by Christiano, Trabandt and Walentin (2010), is shut down. Second, the welfare effects of such shocks improve considerably, modifying the standard results of the open economy literature that set off with Obstfeld and Rogoff's (1995) redux model.
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FU DepartmentDepartment Business and Economics
Other affiliation(s)Institut für Wirtschaftspolitik und Wirtschaftsgeschichte
Year of publication2011
Type of documentBook
Terms of use/Rights Nutzungsbedingungen
Created at2011-12-14 : 02:32:56
Last changed2015-05-21 : 11:59:06
Static URLhttp://edocs.fu-berlin.de/docs/receive/FUDOCS_document_000000012619