scholarly journals Ramsey Monetary Policy With Labour Market Frictions

2007 ◽  
Author(s):  
Ester Faia
Keyword(s):  
Monetary Policy ◽  
Labour Market ◽  
Market Frictions

Full employment will boost US wage growth

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Labour Market ◽  
Federal Reserve ◽  
Full Employment ◽  
Participation Rate ◽  
Job Seekers ◽  
Secular Stagnation ◽  
Content Type ◽  
Percentage Points ◽  
Jobless Rate

Significance The jobless rate is expected to stay unchanged at 4.9%, its lowest level since November 2007. This decline occurred despite a rebound in the participation rate, up 0.5 percentage points (pp) since September and back to its January 2015 level. Labour market behaviour will be a key determinant of the Federal Reserve (Fed)'s pace of monetary policy tightening this year. Impacts Higher cyclical unemployment may become structural through 'hysteresis', as job seekers become discouraged and stop looking for jobs. Structural declines in the participation rate may be one way in which 'secular stagnation' manifests in post-crisis economies. The Fed will monitor closely any overheating risk in the labour market, together with escalating wage and price pressures.

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