Nominal Wage Rigidity in an Optimizing Model of an Open Economy

Steven Ambler () and Emmanuel Hakizimana ()

No 94, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

Abstract: We build a dynamic general equilibrium model of a semi-small open economy in which staggered wage contracts are the only source of nominal rigidity. The model is capable of generating highly variable real and nominal exchange rates while predicting relative variabilities of prices and consumption that are broadly compatible with the data. The model also generates a high degree of persistence of nominal and real exchange rates.

Nous élaborons un modèle dynamique d'équilibre général d'une petite économie ouverte où les contrats de salaire sont la seule source de rigidités nominales. Le modèle est capable d'engendrer des taux de change nominal et réel très variable tout en engendrant des variabilités des prix et de la consommation qui sont comparables aux données. Le modèle génère également un degré élevé de persistance des taux de change nominal et réel.

Keywords: nominal and real exchange rate persistence; wage rigidities (search for similar items in EconPapers)
JEL-codes: E32 F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-lab
Date: Written

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