Understanding the gains from wage flexibility: The exchange rate connection
| Contribuinte(s) |
Universitat Pompeu Fabra. Departament d'Economia i Empresa |
|---|---|
| Data(s) |
19/01/2014
|
| Resumo |
We study the gains from increased wage flexibility and their dependence on exchange rate policy, using a small open economy model with staggered price andwage setting. Two results stand out: (i) the impact of wage adjustments on employment is smaller the more the central bank seeks to stabilize the exchange rate,and (ii) an increase in wage flexibility often reduces welfare, and more likely so ineconomies under an exchange rate peg or an exchange rate-focused monetary policy.Our findings call into question the common view that wage flexibility is particularlydesirable in a currency union. |
| Identificador | |
| Idioma(s) |
eng |
| Direitos |
L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons info:eu-repo/semantics/openAccess <a href="http://creativecommons.org/licenses/by-nc-nd/3.0/es/">http://creativecommons.org/licenses/by-nc-nd/3.0/es/</a> |
| Palavras-Chave | #Macroeconomics and International Economics #sticky wages #nominal rigidities #new keynesian model #stabilization policies #exchange rate policy #currency unions #monetary policy rules. |
| Tipo |
info:eu-repo/semantics/workingPaper |
