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Working Paper
Do nominal rigidities matter for the transmission of technology shocks?
A commonly held view is that nominal rigidities are important for the transmission of monetary policy shocks. We argue that they are also important for understanding the dynamic effects of technology shocks, especially on labor hours, wages, and prices. Based on a dynamic general equilibrium framework, our closed-form solutions reveal that a pure sticky-price model predicts correctly that hours decline following a positive technology shock, but fails to generate the observed gradual rise in the real wage and the near-constance of the nominal wage; a pure sticky-wage model does well in ...
Working Paper
Why does the cyclical behavior of real wages change over time?
This paper seeks to understand the evolution of the cyclical behavior of U.S. real wage rates from the interwar period to the post World War II period using a dynamic general equilibrium model that emphasizes demand-driven business cycle fluctuations. In the model, changes in the cyclical behavior of real wages arise endogenously from the interactions between nominal wage and price rigidities and an evolving input-output structure.
Discussion Paper
A business cycle model with nominal wage contracts and government
We incorporate nominal wage contracts and government into a quantitative general equilibrium framework. Thus, our model includes three types of shocks: a fiscal shock, a monetary shock, and a technology shock. We show that it is possible in this type of environment to generate a low correlation between hours worked and the return to working, a moderately negative correlation between output and aggregate prices and a moderately positive correlation between the real wage rate and output. In sharp contrast with RBC models with indivisible labor, wage contracts magnify mainly the effect of ...