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Working Paper
The rise of goods-market competition and the fall of nominal wage contracting: endogenous wage contracting in a multisector economy
This paper shows how heterogeneity wage-setting and a link between nominal wage flexibility andg goods-market competition rise in a multisector economy that is affected by aggregate and sector-specific shocks. Aggregate volatility increases the variance of real contract wages, whereas sectoral volatility increase the relative variance of real Walrasian wages. Given this tradeoff, the prevalence of nominal wage contracting reflects both the relative volatility of aggregate versus sectoral disturbances and the overall degree of goods-market market competition. We find that these variables help ...
Working Paper
Discretion, wage indexation, and inflation
Working Paper
Borrowed reserves targeting and nominal income smoothing
Working Paper
Borrowed reserves targeting and nominal income smoothing
Working Paper
Wage indexation in a multisector economy
Working Paper
Implications of economic interdependence and exchange rate policy on endogenous wage indexation decisions
This paper shows how economic interdependence affects wage indexation decisions when monetary authorities do not observe stochastic disturbances. Under a managed exchange rate, atomistic wage setters in interdependent nations will choose the same degree of indexation as they would in a small open economy. Under a flexible exchange rate, the likelihood rises that they will choose a lower degree of indexation than their counterparts in a small open economy as the degree of interdependence rises, as the variance of money demand shocks rise relative to supply shocks, and as supply curves steepen. ...