Optimal monetary policy in a dual labor market: the role of informality

Gomez Ospina, Monica A.

doi:https://doi.org/10.48713/10336_45578

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Optimal monetary policy in a dual labor market: the role of informality

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dc.creator	Gomez Ospina, Monica A.	spa
dc.date.accessioned	2025-06-05T20:21:24Z
dc.date.available	2025-06-05T20:21:24Z
dc.date.created	2020-11-01	spa
dc.date.issued	2020-11-01	spa
dc.description	In this paper I analyze the optimal monetary policy in emerging countries whose labor markets are mainly characterized by the presence of a large informal sector. I develop a closed economy model with nominal price and wage rigidities, search and matching frictions and a dual labor market. A formal one characterized by matching frictions, and nominal wage rigidities, and an informal one where wages are fully flexible. Under this framework, a trade-off between price and wage inflation emerges. I find that informality increases the response of price and wage inflation to aggregate productivity shocks. As a result, the presence of an informal sector increases the inefficient fluctuations of the labor market variables, such as unemployment, labor market tightness, and formal hiring rate. I derive the second-order approximation to the welfare of the representative agent, and then I characterize the optimal monetary policy for standard calibration of the model. I find that optimal policy with informality features significant deviations from price stability in response to aggregate productivity shocks.	spa
dc.format.extent	52 pp	spa
dc.format.mimetype	application/pdf	spa
dc.identifier.doi	https://doi.org/10.48713/10336_45578
dc.identifier.uri	https://repository.urosario.edu.co/handle/10336/45578
dc.language.iso	eng	spa
dc.publisher	Universidad del Rosario	spa
dc.publisher	Alianza EFI	spa
dc.publisher.department	Facultad de Economía	spa
dc.rights	Attribution-NonCommercial-NoDerivatives 4.0 International	spa
dc.rights.accesRights	info:eu-repo/semantics/openAccess	spa
dc.rights.acceso	Abierto (Texto Completo)	spa
dc.rights.uri	http://creativecommons.org/licenses/by-nc-sa/4.0/	spa
dc.source.instname	instname:Universidad del Rosario	spa
dc.source.reponame	reponame:Repositorio Institucional EdocUR	spa
dc.subject.keyword	Informality	eng
dc.subject.keyword	Monetary policy	eng
dc.subject.keyword	Nominal wage and price rigidities	eng
dc.subject.keyword	Inflation targeting	eng
dc.title	Optimal monetary policy in a dual labor market: the role of informality	spa
dc.type	workingPaper	spa
dc.type.hasVersion	info:eu-repo/semantics/publishedVersion	spa
dc.type.spa	Documento de trabajo	spa
local.department.report	Facultad de Economía