Extending the NAWM with a partial indexation mechanism linking wages and trend productivitiy

Günter Coenen

MPRA Paper from University Library of Munich, Germany

Abstract: This document sets out the details for extending the wage Phillips curve of the New Area-Wide Model (NAWM; cf. Christoffel, Coenen and Warne, 2008) with a partial indexation mechanism linking wages to trend productivity developments. The document first outlines the labour-market setting in which households are offering their labour services. It then derives the first-order condition characterising the optimal wage-setting decision of an individual household as well as the law of motion for the aggregate wage index. Finally, the document derives the implied log-linear wage Phillips curve. An appendix provides additional technical details of the derivations.

Keywords: DSGE modelling; Bayesian inference; forecasting; policy analysis; euro area (search for similar items in EconPapers)
JEL-codes: C11 C32 E32 E37 (search for similar items in EconPapers)
Date: 2009-10-02
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Citations: View citations in EconPapers (1)

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