Real Wage Rigidities and the New Keynesian Model

Keynesian, Old Keynesian, and New Keynesian Wage Nominalism

Wage nominalism has long been a puzzle for economists. The original Keynesian explanation related it to a coordination failure in the context of decentralized union bargaining, a problem now in a largely nonunion U. S. labor market. Moreover, Keynesianism assumed wage nominalism as the norm rather than explaining it. New Keynesian explanations, based on implicit contracts, menu costs, and other...

Nominal and real wage rigidities. In theory and in Europe

In this paper I study the relation between real wage rigidity (RWR) and nominal price and wage rigidities. I show that in a standard DSGE model RWR is mainly affected by the two nominal rigidities and not by the other structural parameters. The degree of RWR is, however, considerably influenced by the modelling assumption (e.g. Calvo vs. Taylor wage contracts and the clustering of contracts). I...

Labor Market Imperfections , Real Wage Rigidities and Financial Shocks

By using the recent Gertler and Kiyotaki’s (2010) setup, this paper explores the interaction between real distortions stemming from the labor market institutions and …nancial shocks. We …nd that neither labor market imperfections nor …scal institutions determining tax wedges have an impact on the volatility of the real economy induced by a …nancial shock. By contrast, real wage rigidities matte...

The New Keynesian Model

Real Price and Wage Rigidities in a Model with Matching Frictions

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