The optimal monetary policy rule based on the unemployment rate and the inflation rate(12JJD790015)

The optimal monetary policy rule based on the unemployment rate and the inflation rate(12JJD790015)


Leader Jin Cheng-xiao

Members Jin Cheng-xiao,Lu Ying-chao

Origin N/A

Fund 1

Duration 2014.1-2015.1

Introduction

In this paper, we build a small macroeconomic model with microeconomic foundation and dual sticky property to characterize the relationship between inflation rate and unemployment rate and gives the optimal monetary policy rules under the policy objectives.  The results show that: ( 1) The parameter of price sticky is 0.  4936,  there are 50.  64% of companies which will follow the best way to adjust price in every quarter, and t,  so assumes the existence of labor market friction reasonable; ( 2) Using inflation and unemployment rate as the threshold of the Interest rate has a smaller welfare loss; ( 3) When two variables are in a reasonable range,  through loss the unemployment rate to exchange the stable of the inflation rate can get greater social welfare; ( 4) Lower wage sticky and moderately improve price sticky benefit the stable of economy.  The innovations of this paper are that: We join the character of the labor market frictions in the New Keynesian model.

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