Downward Nominal Wage Rigidity and Inflation Dynamics during and after the Great Recession

Tomohide Mineyama

Journal of Money, Credit and Banking, 2023, vol. 55, issue 5, 1213-1244

Abstract: In this paper, I develop a New Keynesian model that embeds heterogeneous workers with asymmetric wage adjustment costs to address two inflation puzzles: missing deflation during the Great Recession and the subsequent missing inflation. When the wage adjustment costs are estimated according to U.S. microwage data, downward nominal wage rigidity emerges, which flattens the observed price Phillips curve during and after recessions. Endogenous evolution of the cross‐sectional wage distribution generates nonlinear dynamics including the sign, size, and state dependence. These nonlinearities enable the model to address the inflation puzzles as well as matching microevidence on wage adjustments.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12982

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:wly:jmoncb:v:55:y:2023:i:5:p:1213-1244

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().