Galí, Jordi, 1961-Monacelli, TommasoUniversitat Pompeu Fabra. Departament d'Economia i Empresa2013-12-01http://hdl.handle.net/10230/21807We 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.application/pdfengL'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commonsinfo:eu-repo/semantics/workingPaperMacroeconomics and International Economicssticky wagesnominal rigiditiesnew keynesian modelstabilization policiesexchange rate policycurrency unionsmonetary policy rules.info:eu-repo/semantics/openAccess