Publication

This paper studies the optimal monetary policy in a new Keynesian model with labor turnover costs in which wages are set according to a right to manage bargaining. In this model, the firms' counterpart is given by currently employed workers. The model captures the features of European labor market, as it leads to sclerotic dynamics of worker flows. The authors explain that the coexistence of those types of labor market frictions alongside with sticky prices gives rise to a non-trivial trade-off for the monetary authority.