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Understanding the gains from wage flexibility: the exchange rate connection

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dc.contributor.author Galí, Jordi, 1961-
dc.contributor.author Monacelli, Tommaso
dc.date.accessioned 2018-12-03T12:31:13Z
dc.date.available 2018-12-03T12:31:13Z
dc.date.issued 2016
dc.identifier.citation Galí J, Monacelli T. Understanding the gains from wage flexibility: the exchange rate connection. Am Econ Rev. 2016;106(12):3829-68. DOI: 10.1257/aer.20131658
dc.identifier.issn 0002-8282
dc.identifier.uri http://hdl.handle.net/10230/35943
dc.description.abstract We study the gains from increased wage flexibility using a small open economy model with staggered price and wage setting. Two results stand out: (i) the effectiveness of labor cost reductions as a means to stimulate employment is much smaller in a currency union, and (ii) an increase in wage flexibility often reduces welfare, more likely so in an economy that is part of a currency union or with an exchange-rate-focused monetary policy. Our findings call into question the common view that wage flexibility is particularly desirable in a currency union.
dc.description.sponsorship We thank the Fondation Banque de France for financial support.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher American Economic Association
dc.relation.ispartof American Economic Review. 2016;106(12):3829-68.
dc.rights © American Economic Association. Can be found at http://dx.doi.org/10.1257/aer.20131658
dc.title Understanding the gains from wage flexibility: the exchange rate connection
dc.type info:eu-repo/semantics/article
dc.identifier.doi http://dx.doi.org/10.1257/aer.20131658
dc.rights.accessRights info:eu-repo/semantics/openAccess
dc.type.version info:eu-repo/semantics/publishedVersion


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