Understanding the Gains from Wage Flexibility: The Exchange Rate Connection

• 成果类型: Article
• 署名作者: Gali, Jordi; Monacelli, Tommaso
• 署名单位: Pompeu Fabra University; Centre de Recerca en Economia Internacional (CREI); Barcelona School of Economics; Bocconi University; Bocconi University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20131658
• 发表日期: 2016
• 页码: 3829-3868
• 关键词: monetary-policy; open-economy; MODEL; rigidities; micro

摘要

We study the gains from increased wage flexibility using a small open economy model with staggered price and wage setting. Two results stand out: (i) the effectiveness of labor cost reductions as a means to stimulate employment is much smaller in a currency union, and (ii) an increase in wage flexibility often reduces welfare, more likely so in an economy that is part of a currency union or with an exchange-rate-focused monetary policy. Our findings call into question the common view that wage flexibility is particularly desirable in a currency union.