Exchange rate regimes and wage comovements in a Ricardian model with money

• 成果类型: Article
• 署名作者: Kurokawa, Yoshinori; Pang, Jiaren; Tang, Yao
• 署名单位: University of Tsukuba; Tsinghua University; Bowdoin College
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2016.06.002
• 发表日期: 2016
• 页码: 96-109
• 关键词: Ricardian model; Fixed exchange rate regime; currency union; TRADE; Wage comovements

摘要

We construct a Ricardian model of trade with money and trade costs. The model predicts that the nominal wages of the trading countries exhibit stronger positive comovements when the countries fix their bilateral exchange rates, while comovements of real wages are not affected by exchange rate regimes. Our numerical experiments suggest that a reduction in trade costs increases both nominal and real wage comovements, regardless of regimes. When downward nominal wage rigidity is introduced, nominal wage comovements under the fixed regime remain stronger than under the flexible regime and the difference is smaller on the shorter time horizon, while a slight difference in real wage comovements between the two regimes shows up and is larger on the shorter time horizon. When we consider membership in the Economic and Monetary Union of the European Union as a fixed exchange rate regime, panel regression results based on data from OECD countries are broadly consistent with our model and numerical experiments. (C) 2016 Elsevier B.V. All rights reserved.