Real wages and monetary policy: a DSGE approach
Bryan Perry,
Kerk Phillips and
David Spencer
Journal of Economic Studies, 2015, vol. 42, issue 5, 734-752
Abstract:
Purpose - – Studies of the cyclical behavior of real wages have identified monetary shocks and examined the response of real wages and output or employment. A finding that real wages are procyclical in response to a positive monetary policy shock is taken as evidence that prices are stickier than wages. The purpose of this paper is to show that factors other than wage and price stickiness affect the response of real wages to a monetary policy shock. Design/methodology/approach - – The authors simulate two prominent dynamic stochastic general equilibrium models under a variety of parameter values and examine the cyclicality of the real wage. Findings - – The authors offer robust evidence that the real wage response to monetary policy is affected in important ways by properties of the economy other than stickiness of wages and prices, such as the importance of intermediate goods in the production process and the size of key elasticities. Consequently, the authors cannot appropriately infer the relative stickiness of wages and prices from examining only the response of real wages to a monetary policy shock. Originality/value - – The authors show in this study that examining the response of real wages is not enough to sort out the relative stickiness of prices and wages.
Keywords: Monetary policy; DSGE models; Real wages (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:
Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers
Related works:
Working Paper: Real Wages and Monetary Policy: A DSGE Approach (2012) 
Working Paper: Real wages and monetary policy: A DSGE approach (2012) 
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:eme:jespps:v:42:y:2015:i:5:p:734-752
DOI: 10.1108/JES-01-2014-0008
Access Statistics for this article
Journal of Economic Studies is currently edited by Prof Mohsen Bahmani-Oskooee
More articles in Journal of Economic Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().