Downward Wage Rigidities and Optimal Monetary Policy in a Monetary Union
Stephan Fahr () and
Frank Smets
Scandinavian Journal of Economics, 2010, vol. 112, issue 4, 812-840
Abstract:
This paper analyses the implications of heterogeneity in the type of downward wage rigidity (nominal or real) for optimal monetary policy in a monetary union with asymmetric wage adjustment costs. Indexation in one region of the union reduces optimal grease inflation in the presence of common productivity shocks. Large common shocks may have sizeable and persistent effects on the intra‐union terms of trade, whereby the region characterized by downward real wage rigidity adjusts with a persistent loss of competitiveness. In response to asymmetric productivity shocks, there is no role for grease inflation because relative price changes facilitating the real wage changes dominate the adjustment mechanism.
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (65)
Downloads: (external link)
https://doi.org/10.1111/j.1467-9442.2010.01627.x
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:112:y:2010:i:4:p:812-840
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520
Access Statistics for this article
Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten
More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().