Real Wage Cyclicality and Monetary Policy

Eunseong Ma

No 2022rwp-201, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: Conventional wisdom based on many empirical studies has long held that real wages are procyclical conditional on a monetary policy shock. This paper challenges this conventional view by developing a quantitative heterogeneous-agent New Keynesian economy with sticky wages. I find that true real wages may be countercyclical conditional on a monetary policy shock, but the data may predict the wrong direction of the real wage dynamics due to the inconsistent definition. This result implies that the predictions of New Keynesian models with wage rigidities are consistent with the data.

Keywords: Monetary policy; Real wages; Labor share; Earnings inequality. (search for similar items in EconPapers)
JEL-codes: D31 E52 J31 (search for similar items in EconPapers)
Pages: 40pages
Date: 2022-08
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lma and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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