Pegs, Downward Wage Rigidity, and Unemployment: the Role of Financial Structure

Stephanie Schmitt-Grohe and Martín Uribe ()

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This paper studies the relationship between financial structure and the welfare consequences of fixed exchange rate regimes in small open emerging economies with downward nominal wage rigidity. Two surprising results are obtained. First, that a pegging economy might be better off with a closed capital account than with an open one. Second, that the welfare gain from switching from a peg to the optimal (full-employment) monetary policy might be greater in financially open economies than in financially closed ones.

Date: 2012-07
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.bcentral.cl/documents/33528/133326/DTBC_672.pdf (application/pdf)

Related works:
Chapter: Pegs, Downward Wage Rigidity and Unemployment: The Role of Financial Structure (2014)
Working Paper: Pegs, Downward Wage Rigidity, and Unemployment: The Role of Financial Structure (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:chb:bcchwp:672

Access Statistics for this paper

More papers in Working Papers Central Bank of Chile from Central Bank of Chile Contact information at EDIRC.
Bibliographic data for series maintained by Alvaro Castillo ().