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| Abstract |
No, is the answer we find in an estimated DSGE model of involuntaryunemploy ment for the US economyin which optimal policyshows the considerable tension between stabilizations of inflation and unemplo...yment due to the exogenous movements in workersʼ market power. Our counterfactual exercises show in the absence of the latter emerges no policytrade-o ff with effectivelyminimal welfare losses. Our findings are consistent with some seminal contributions in optimal policy―with no unemployment variable―of the “divine coincidence” of Blanchard and Galí (2010) and the “trinity” of Justiniano, Primiceri and Tambalotti (2013), but our keycontribution lies in its direct measurement of the stabilityof unemployment and welfare losses conceived byUS households.show more
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