Gains from Wage Flexibility and the Zero Lower Bound
Roberto Billi and
Jordi Galí ()
Additional contact information
Jordi Galí: CREI, UPF and Barcelona GSE
No 367, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)
We analyze the welfare impact of greater wage exibility while taking into account explicitly the existence of the zero lower bound (ZLB) constraint on the nominal interest rate. We show that the ZLB constraint generally amplifies the adverse effects of greater wage exibility on welfare when the central bank follows a conventional Taylor rule. When demand shocks are the driving force, the presence of the ZLB implies that an increase in wage exibility reduces welfare even under the optimal monetary policy with commitment.
Keywords: labor market exibility; nominal rigidities; optimal monetary policy with commitment; Taylor rule; ZLB (search for similar items in EconPapers)
JEL-codes: E24 E32 E52 (search for similar items in EconPapers)
Pages: 42 pages
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.riksbank.se/globalassets/media/rapport ... zero-lower-bound.pdf Full text (application/pdf)
Working Paper: Gains from wage flexibility and the zero lower bound (2019)
Working Paper: Gains from Wage Flexibility and the Zero Lower Bound (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0367
Access Statistics for this paper
More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().