Publication

This paper builds a model to analyze optimal monetary policy responses given an outward shifts in the Beveridge Curve (BC), indicating greater labor market inefficiency. The author argues the optimal policy response that policymakers face depends upon the causes of the shift: whether the shock is due to a fall in the efficiency of job matching; or due an increase in the elasticity of employment. The author also considers the implications for optimal policy choices under assumptions of sticky wages in the labor market.