Monetary Policy in an Economy with Frictional Labor Market - Case of Poland

Authors

PÁPAI Adam

Year of publication 2016
Type Article in Proceedings
Conference Proceedings of 34th International Conference Mathematical Methods in Economics
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web Conference proceedings
Field Economy
Keywords DSGE model; monetary policy; labor market frictions; Polish economy
Description The aim of this paper is to investigate the impacts and effectiveness of the monetary policy in the Polish economy during the last 14 years. Furthermore, we are interested in the effects of the Great Recession, which was caused by the financial crisis in 2007, on the behavior of key macroeconomic variables. To achieve our goals, we choose and estimate a dynamic stochastic general equilibrium model specified for a small open economy. The model is characterized by an explicitly defined labor market. The model version of this sector of the economy contains several frictions in form of a search and matching function, wage adjustment costs, hiring costs and wage bargaining processes. We implement a few different Taylor-type equations, which represent the decision making rule of the monetary authority. This approach helps us identify the main relationships, which the monetary policy maker takes into consideration while setting the interest rates. We then examine the impacts of monetary policy shock on the output and labor market.
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