Home » Labor Force Participation and Monetary Policy in the Wake of the Great Recession by Christopher J Erceg
Labor Force Participation and Monetary Policy in the Wake of the Great Recession Christopher J Erceg

Labor Force Participation and Monetary Policy in the Wake of the Great Recession

Christopher J Erceg

Published December 16th 2013
ISBN : 9781484302606
ebook
60 pages
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 About the Book 

In this paper, we provide compelling evidence that cyclical factors account for the bulk of the post-2007 decline in the U.S. labor force participation rate. We then proceed to formulate a stylized New Keynesian model in which labor forceMoreIn this paper, we provide compelling evidence that cyclical factors account for the bulk of the post-2007 decline in the U.S. labor force participation rate. We then proceed to formulate a stylized New Keynesian model in which labor force participation is essentially acyclical during normal times (that is, in response to small or transitory shocks) but drops markedly in the wake of a large and persistent aggregate demand shock. Finally, we show that these considerations can have potentially crucial implications for the design of monetary policy, especially under circumstances in which adjustments to the short-term interest rate are constrained by the zero lower bound.