Downward Nominal Wage Rigidity, Currency Pegs, and Involuntary Unemployment

2016 ◽  
Vol 124 (5) ◽  
pp. 1466-1514 ◽  
Author(s):  
Stephanie Schmitt-Grohé ◽  
Martín Uribe
Keyword(s):  
Wage Rigidity ◽  
Nominal Wage ◽  
Involuntary Unemployment ◽  
Nominal Wage Rigidity ◽  
Currency Pegs

Managing Currency Pegs

2012 ◽  
Vol 102 (3) ◽  
pp. 192-197 ◽  
Author(s):  
Stephanie Schmitt-Grohé ◽  
Martín Uribe
Keyword(s):  
Exchange Rate ◽  
Graphical Analysis ◽  
Wage Rigidity ◽  
Nominal Wage ◽  
Involuntary Unemployment ◽  
Second Best ◽  
Alternative Policy ◽  
Nominal Wage Rigidity ◽  
Currency Pegs ◽  
Real Rigidity

The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity. In turn, this real rigidity makes the economy prone to involuntary unemployment during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency. First- and second-best monetary and fiscal solutions are analyzed. Second-best solutions are prudential, whereas first-best solutions are not.

The Firm, Wage Indexation, and Nominal Wage Rigidity

2016 ◽  
Author(s):  
James M. Holmes ◽  
John M. Holmes ◽  
Patricia A. Hutton
Keyword(s):  
Wage Rigidity ◽  
Nominal Wage ◽  
Wage Indexation ◽  
Nominal Wage Rigidity

Downward Nominal Rigidity in West German Earnings, 1975-95

2001 ◽  
Vol 2 (4) ◽  
pp. 385-417 ◽  
Author(s):  
Thomas Beissinger ◽  
Christoph Knoppik
Keyword(s):  
Business Cycle ◽  
Analytical Framework ◽  
Wage Rigidity ◽  
Nominal Wage ◽  
Symmetry Approach ◽  
Nominal Rigidity ◽  
Inflation Targets ◽  
Nominal Wage Rigidity ◽  
Time Invariant

Abstract If downward nominal wage rigidity exists, it should affect the distribution of earnings changes. We present a common analytical framework for three distinct and previously unconnected approaches to the analysis of downward nominal rigidity, the skewness±location approach, the symmetry approach and the histogram±location approach. We modify them by dropping the assumption of time-invariant rigidity and apply them to earnings data from the IABB-escha Èftigtenstichprobe (IABS). We find that the distribution of West German log earnings changes is indeed affected by downward nominal rigidity. Our modification of the approaches also allows us to find that the degree of nominal rigidity depends on business cycle conditions, with weaker rigidity in times of rising unemployment. Our findings support the critics of very low inflation targets.

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