Downward wage rigidity and wage restraint

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• dc.contributor.author Wolf, Martinca
• dc.date.accessioned 2018-09-27T11:48:36Z
• dc.date.available 2018-09-27T11:48:36Z
• dc.date.issued 2018-05
• dc.description.abstract The combination of downward nominal wage rigidity and pegged exchange rate creates an externality which leads to excessive wage inflation (Schmitt-Groh_e and Uribe, 2016). This paper re-examines this result assuming that wage setters are forward looking, hence endogenously restrain wage increases facing downward wage rigidity, as in Elsby (2009). In this case, wage inflation is either excessively high or excessively low compared to the social optimum: while wages increase too strongly following demand shocks, they rise by too little following Balassa-Samuelson-type technology shocks. Applying the model to euro area countries, I document excessively high wage inflation rates in the euro periphery, but excessively low rates in the euro core, in the pre-crisis period.ca
• dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
• dc.format.mimetype application/pdfca
• dc.identifier.uri http://hdl.handle.net/10230/35521
• dc.language.iso engca
• dc.relation.ispartofseries ADEMU Working Paper Series;126
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
• dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.ca
• dc.rights.accessRights info:eu-repo/semantics/openAccessca
• dc.rights.uri https://creativecommons.org/licenses/by/4.0/ca
• dc.subject.other Downward nominal wage rigidityca
• dc.subject.other Currency pegca
• dc.subject.other Unemploymentca
• dc.subject.other Euro crisisca
• dc.subject.other Unit labour costsca
• dc.subject.other Real exchange rateca
• dc.subject.other Wage restraintca
• dc.title Downward wage rigidity and wage restraintca
• dc.type info:eu-repo/semantics/workingPaperca