JOINT VIENNA MACROECONOMICS SEMINAR	INVITATION
R E M I N D E R The Joint Vienna Institute and the Department of Economics and Finance at the Institute for Advanced Studies cordially invite you to the following Joint Vienna Macroeconomics Seminar Tuesday, October 27, 2015 Attention – New Address Institute for Advanced Studies Josefstädter Straße 39, 1080 Vienna Lecture Room E02, ground floor 5:00 pm Lien Laureys Bank of England  Optimal monetary policy in the presence of human capital depreciation during unemployment Abstract: When workers are exposed to human capital depreciation during periods of unemployment, hiring affects the unemployment pool’s composition in terms of skills, and hence the economy’s production potential. Introducing human capital depreciation during unemployment into an otherwise standard New Keynesian model with search frictions in the labour market leads to the finding that the flexible-price allocation is no longer constrained-efficient even when the standard Hosios condition holds. This is because it generates a composition externality in job creation: firms ignore how their hiring decisions affect the extent to which the unemployed workers’ skills erode, and hence the output that can be produced by new matches. Consequently, it might be desirable from a social point of view for monetary policy to deviate from strict inflation targeting. But quantitative analysis shows that although optimal price inflation is no longer zero, strict inflation targeting stays close to the optimal policy. We are looking forward to seeing you! Institute for Advanced Studies Department of Economics and Finance Josefstädter Straße 39, 1080 Vienna, Austria Tel.: +43 1 599 91 145 e-Mail: economics@ihs.ac.at http://economics.ihs.ac.at		LINKS DIRECTIONS TO IHS on Google maps JOINT VIENNA MACRO SEMINAR on Google calendar ECONOMICS SEMINARS IN VIENNA on Google calendar IHS Department of Economics and Finance Dept of Economics and Finance @IHS_Eco_Fin Institute for Advanced Studies @IHS_Vienna
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