Monetary Policy and Unemployment: Literature Review and Computational Examples

Abstract

This paper will review current stance on New-Keynesian monetary policy models with unemployment as well as search-matching models,also one particular model will be investigated that divides unemployment rate in steady-state on rationing (without presence of search frictions) and frictional unemployment.Review of computational examples following McCall (1970) and DMP model will provide policy conclusions from these models. Central role of unemployment in the policy debate ensured that this variable will not be conspicuously absent from the new generation of models that have become the workhorse for the analysis of monetary policy.