Trade liberalization, wage inequality, and monetary policy

Wolfgang Lechthaler and Mariya Mileva

Journal of International Money and Finance, 2024, vol. 143, issue C

Abstract: We build a dynamic model of two countries, two sectors and two factors with firm heterogeneity and price rigidity to analyze the short-run and long-run consequences of trade liberalization and its interaction with monetary policy. We find that price rigidity slows down the reallocation process and might imply temporary falls in real wages for some workers. The stance of monetary policy also has a big impact on real wages and real GDP.

Keywords: Trade policy; Monetary policy; Price rigidity; Dynamic trade model; Inequality (search for similar items in EconPapers)
JEL-codes: F11 F12 F13 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:143:y:2024:i:c:s0261560624000524

DOI: 10.1016/j.jimonfin.2024.103065

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