Wage Rigid: The Relationship between Real Output and Wage with or without Monetary Policy

Wage Indexation and Monetary Policy∗

This paper analyzes the impact of indexed wage contracts on inflation and social welfare in a Barro–Gordon model with state contingent monetary policy. Wage indexation reduces the inflation bias but may raise the variance of inflation rates. In social optimum wages are fully indexed to the price level, but this requires optimal wage adjustments to productivity shocks. If wage adjustments to pro...

Non-Atomistic Wage Setters and Monetary Policy

The purpose of the paper is to study the monetary policy implications of unionized labor markets in a New Keynesian framework. It is shown that, once the presence of large wage setters is taken into account, the degree of wage setting centralization and the aggressiveness of the central bank in stabilizing inflation jointly affect the equilibrium level of real economic activity in the long-run....

Relationship between nominal wage and price flexibility: Implications for monetary policy∗

The frequencies at which prices and wages are adjusted are key elements in workhorse models used for policy analysis. Yet, there is little evidence regarding the relationship between these two sources of nominal rigidities. Using large price and wage micro-datasets, this paper shows that the frequency of price adjustments is positively related to the frequency of wage changes across industries....

The Nonneutrality of Monetary Policy with Large Price or Wage Setters

Monetary rules matter for the equilibrium rate of employment when the number of price-wage setters is small, even when assuming rational expectations, complete information, central bank precommitment, and absence of nominal rigidities. If the central bank is nonaccommodating, sufficiently large unions, bargaining independently, have an incentive to moderate sectoral money wages, and thereby exp...

Institutional Dimensions of Coordinating Wage-Bargaining and Monetary Policy