State Dependency in Price and Wage Setting
Shuhei Takahashi
International Journal of Central Banking, 2017, vol. 13, issue 1, 151-189
Abstract:
The frequency of nominal wage adjustments varies with macroeconomic conditions, but existing models exclude such state dependency in wage setting and assume constant frequency under time-dependent setting. This paper develops a New Keynesian model in which fixed wage-setting costs generate state-dependent wage setting. I find that state-dependent wage setting reduces the real impacts of monetary shocks compared with time-dependent setting. However, when parameterized to reproduce the fluctuations in wage rigidity in the United States, the state-dependent wage-setting model generates responses to monetary shocks similar to those of the time-dependent model. The trade-off between output gap and inflation variability is also similar between these two models.
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
http://www.ijcb.org/journal/ijcb17q0a4.pdf (application/pdf)
http://www.ijcb.org/journal/ijcb17q0a4.htm (text/html)
Related works:
Working Paper: State Dependency in Price and Wage Setting (2015) 
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:ijc:ijcjou:y:2017:q:0:a:4
Access Statistics for this article
International Journal of Central Banking is currently edited by Loretta J. Mester
More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().