In an estimated two-sector New-Keynesian model with durable and nondurable goods, an
inverse relationship between sectoral labor mobility and the optimal weight the central bank
should attach to durables inflation arises. The combination of nominal wage stickiness and
limited labor mobility leads to a nonzero optimal weight for durables inflation even if
durables prices were fully flexible. These results survive alternative calibrations and interestrate
rules and point toward a non-negligible role of sectoral labor mobility for the conduct of
monetary policy.
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