Downward Nominal Wage Rigidity, Currency Pegs, and Involuntary Unemployment

• 成果类型: Article
• 署名作者: Schmitt-Grohe, Stephanie; Uribe, Martin
• 署名单位: Columbia University; Center for Economic & Policy Research (CEPR); National Bureau of Economic Research; Columbia University
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/688175
• 发表日期: 2016
• 页码: 1466-1514
• 关键词: small open-economy; monetary-policy; business cycles; real; rates; booms

摘要

This paper analyzes the inefficiencies arising from the combination of fixed exchange rates, nominal rigidity, and free capital mobility. We document that nominal wages are downwardly rigid in emerging countries. We develop an open-economy model that incorporates this friction. The model predicts that the combination of a currency peg and free capital mobility creates a negative externality that causes over-borrowing during booms and high unemployment during contractions. Optimal capital controls are shown to be prudential. For plausible calibrations, they reduce unemployment by around 5 percentage points. The optimal exchange rate policy eliminates unemployment and calls for large devaluations during crises.