Replication data for: Understanding the Gains from Wage Flexibility: The Exchange Rate Connection
Principal Investigator(s): View help for Principal Investigator(s) Jordi Galí; Tommaso Monacelli
Version: View help for Version V1
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Project Citation:
Galí, Jordi, and Monacelli, Tommaso. Replication data for: Understanding the Gains from Wage Flexibility: The Exchange Rate Connection. Nashville, TN: American Economic Association [publisher], 2016. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E112966V1
Project Description
Summary:
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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.
Scope of Project
JEL Classification:
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E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
E52 Monetary Policy
E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
F31 Foreign Exchange
F33 International Monetary Arrangements and Institutions
F41 Open Economy Macroeconomics
E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
E52 Monetary Policy
E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
F31 Foreign Exchange
F33 International Monetary Arrangements and Institutions
F41 Open Economy Macroeconomics
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