Real Wages and Monetary Policy: A DSGE Approach

The article examines the influence of monetary policy of the Bank of Russia on the dynamics of real GDP and its components, real wages and employment from 2003 to 2016. Using the Bayesian structural vector autoregression model (BSVAR) with recent dataset, the paper provides the calculation of the extent of changes in the main Russia’s real sector indicators in response to monetary policy, money base and exchange rate shocks. The analysis allows to conclude that monetary policy leads to real variables changes in Russia. The expected contractionary monetary policy of the Central Bank of Russia with higher interest rates had a statistically valid weak negative effect on real indicators.

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The Missing Link: Monetary Policy and The Labor Share

Journal of the European Economic Association ◽

10.1093/jeea/jvaa034 ◽

2020 ◽

Author(s):

Cristiano Cantore ◽

Filippo Ferroni ◽

Miguel León-Ledesma

Keyword(s):

Monetary Policy ◽

The United States ◽

New Keynesian ◽

Great Moderation ◽

Real Wages ◽

Present Evidence ◽

Labor Share ◽

Nk Model ◽

The United Kingdom ◽

Monetary Policy Shock

Abstract The textbook New Keynesian (NK) model implies that the labor share is procyclical conditional on a monetary policy shock. We present evidence that a monetary policy tightening robustly increased the labor share and decreased real wages during the Great Moderation period in the United States, the Euro Area, the United Kingdom, Australia, and Canada. We show that this is inconsistent not only with the basic NK model, but also with medium-scale NK models commonly used for monetary policy analysis and where it is possible to break the direct link between the labor share and the inverse markup. Our results imply that either NK models are unable to separate the dynamics of the labor share from the markup or markups do not respond in the way NK models predict.

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Real Wages and Monetary Policy Transmission in the Euro Area

SSRN Electronic Journal ◽

10.2139/ssrn.1967941 ◽

2007 ◽

Cited By ~ 6

Author(s):

Andrew H. McCallum ◽

Frank Smets

Keyword(s):

Monetary Policy ◽

Euro Area ◽

Monetary Policy Transmission ◽

Real Wages ◽

Policy Transmission

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Recessions in a two-sector model: Capitalists’ risk preferences determine workers' real wages

10.31235/osf.io/rvne2 ◽

2019 ◽

Author(s):

Yuuki Maruyama

Keyword(s):

Monetary Policy ◽

Consumer Goods ◽

Labor Demand ◽

Risk Preference ◽

Sudden Increase ◽

Marginal Product ◽

Real Wages ◽

Capital Goods ◽

Sector Model ◽

Positive Externalities

With a two-sector model of the consumer goods sector and the capital goods sector, this paper analyzes workers’ real wages. The higher the risk preference of capitalists, the greater the ratio of capital goods to safe assets in savings, the labor demand in the capital goods sector will increase, some workers will move from the consumer goods sector to the capital goods sector, the marginal product of labor will rise in both sectors, and workers’ real wages will increase. In this model, a sudden increase in capitalists’ risk aversion can cause a recession. In addition, this model is used to analyze monetary policy, suppression of an overheating economy, and two positive externalities from capitalists to workers.

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Real Wage Effects of Japan’s Monetary Policy

ORDO ◽

10.1515/ordo-2019-0012 ◽

2019 ◽

Vol 2018 (69) ◽

pp. 177-215

Author(s):

Sophia Latsos

Keyword(s):

Monetary Policy ◽

Real Wage ◽

Policy Design ◽

Nominal Wage ◽

Structural Factors ◽

Monetary Policy Shocks ◽

Real Wages ◽

Wage Effects ◽

Policy Shocks ◽

Nominal Wage Rigidity

AbstractThis paper examines real wage effects of monetary policy in Japan, particularly during the past two decades of monetary easing. The literature generally attributes real wage trends to structural factors that influence the nominal wage components, such as the disappearance of downward nominal wage rigidity. The contribution of this paper is twofold. First, it offers a theoretical framework for the transmission of monetary policy shocks to real wages, emphasizing the responsiveness of labor productivity growth to monetary expansion. Secondly, it alludes to the significance of real wage effects of monetary policy for optimal policy design.

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Real wages and monetary policy: a DSGE approach

Journal of Economic Studies ◽

10.1108/jes-01-2014-0008 ◽

2015 ◽

Vol 42 (5) ◽

pp. 734-752

Author(s):

Bryan Perry ◽

Kerk Phillips ◽

David E. Spencer

Keyword(s):

Monetary Policy ◽

Real Wage ◽

Dynamic Stochastic General Equilibrium ◽

Monetary Shocks ◽

Real Wages ◽

Content Type ◽

The Real ◽

Dynamic Stochastic ◽

Monetary Policy Shock ◽

Parameter Values

Purpose – Studies of the cyclical behavior of real wages have identified monetary shocks and examined the response of real wages and output or employment. A finding that real wages are procyclical in response to a positive monetary policy shock is taken as evidence that prices are stickier than wages. The purpose of this paper is to show that factors other than wage and price stickiness affect the response of real wages to a monetary policy shock. Design/methodology/approach – The authors simulate two prominent dynamic stochastic general equilibrium models under a variety of parameter values and examine the cyclicality of the real wage. Findings – The authors offer robust evidence that the real wage response to monetary policy is affected in important ways by properties of the economy other than stickiness of wages and prices, such as the importance of intermediate goods in the production process and the size of key elasticities. Consequently, the authors cannot appropriately infer the relative stickiness of wages and prices from examining only the response of real wages to a monetary policy shock. Originality/value – The authors show in this study that examining the response of real wages is not enough to sort out the relative stickiness of prices and wages.

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