BoE paper tests optimal policy when workers lose skills

bank-of-england

Research published by the Bank of England (BoE) finds that optimal monetary policy may shift if it takes into account the loss of skills among unemployed workers.

The working paper, Optimal monetary policy in the presence of human capital depreciation during unemployment, by Lien Laureys, begins with the premise that firms do not take into account the loss of skills during unemployment when making their hiring decisions. This imposes an externality on the economy, altering the trade-off between

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