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

Stephanie Schmitt-Grohe and Martín Uribe ()

No 18223, NBER Working Papers from National Bureau of Economic Research, Inc

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. The paper presents two surprising results. First, a pegging economy might be better off with a closed than with an open capital account. Second, the welfare gain from switching from a peg to the optimal (full-employment) monetary policy might be larger in financially open economies than in financially closed ones.

JEL-codes: F41 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-mon and nep-opm
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as “Pegs, Downward Wage Rigidity, and Unemployment: The Role of Financial Structure” (with Stephanie Schmitt-Groh´e), in Capital Mobility and Monetary Policy, edited by Miguel Fuentes D., Claudio E. Raddatz, Carmen M. Reinhart, Central Bank of Chile, Santiago, Chile, 2014, 69-95.

Downloads: (external link)
http://www.nber.org/papers/w18223.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:nbr:nberwo:18223

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w18223

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().