Wage and price rigidity in a monetary union

Bernardino Adao; Isabel Correia; Pedro Teles

doi:10.1007/s11079-009-9156-2

Wage and price rigidity in a monetary union

Bernardino Adao^*, Isabel Correia, Pedro Teles

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

We extend irrelevance results of sticky prices and fixed exchange rates to environments with sticky wages. Provided payroll taxes can be used with the same flexibility as monetary policy, then sticky wages are irrelevant for both optimal allocations and policies in response to shocks. This is the case also under fixed exchange rates or in a monetary union.

Original language	English
Pages (from-to)	109-126
Number of pages	18
Journal	Open Economies Review
Volume	21
Issue number	1
DOIs	https://doi.org/10.1007/s11079-009-9156-2
Publication status	Published - Mar 2010

Keywords

Fiscal and monetary policy
Fixed exchange rates
Monetary union
Stabilization policy
Sticky prices
Sticky wages

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10.1007/s11079-009-9156-2

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abstract = "We extend irrelevance results of sticky prices and fixed exchange rates to environments with sticky wages. Provided payroll taxes can be used with the same flexibility as monetary policy, then sticky wages are irrelevant for both optimal allocations and policies in response to shocks. This is the case also under fixed exchange rates or in a monetary union.",

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author = "Bernardino Adao and Isabel Correia and Pedro Teles",

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AB - We extend irrelevance results of sticky prices and fixed exchange rates to environments with sticky wages. Provided payroll taxes can be used with the same flexibility as monetary policy, then sticky wages are irrelevant for both optimal allocations and policies in response to shocks. This is the case also under fixed exchange rates or in a monetary union.

KW - Fiscal and monetary policy

KW - Fixed exchange rates

KW - Monetary union

KW - Stabilization policy

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KW - Sticky wages

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Wage and price rigidity in a monetary union

Abstract

Keywords

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