Title of article
Optimalfiscalandmonetarypolicywithcostlywagebargaining
Author/Authors
DavidM.Arseneau، نويسنده ,
Issue Information
روزنامه با شماره پیاپی سال 2008
Pages
14
From page
1401
To page
1414
Abstract
Costlynominalwageadjustmenthasreceivedrenewedattentioninthedesignof
optimal policy.Inthispaper,weembedcostlynominalwageadjustmentintothe
moderntheoryoffrictionallabormarketstostudyoptimalfiscalandmonetarypolicy.
The mainresultisthattheoptimalrateofpriceinflationisquitevolatiledespitethe
presence ofnominalwagerigidities.Thisfindingcontrastswithresultsobtainedin
standardsticky-wagemodels,whichemployneoclassicallabormarketsattheircore.In
addition,thetax-smoothingresultthatliesattheheartofoptimalpolicyprescriptions
in standardRamseymodelsdoesnotcarryovertoasearchandbargainingenvironment.
Both resultsstemfromacommonsourceinourmodel.Sharedrentsassociatedwiththe
formationoflong-termemploymentrelationshipsimplythattheoptimalpolicyentails
fluctuationsinafter-taxrealwagesmuchlargerthaninmodelswithneoclassicallabor
markets, inwhichnosuchrent-sharingmarginexists.Theresultsdemonstratethatthe
level atwhichnominalwagerigidityismodeled—whethersimplylayeredontopofa
neoclassicalmarketorarticulatedinthecontextofanexplicitrelationshipbetween
workersandfirms—can matteragreatdealforpolicyrecommendations
Keywords
Inflation stabilityRealwagedynamicsRamsey modelFriedmanRuleLabor search
Journal title
Journal of Monetary Economics
Serial Year
2008
Journal title
Journal of Monetary Economics
Record number
846258
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