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Non-uniform wage-staggering: European evidence and monetary policy implications

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  • Juillard, Michel

    ()
    (Banque de France)

  • Le Bihan, Herve

    ()
    (Banque de France)

  • Millard, Stephen

    ()
    (Bank of England)

Abstract

In many countries, wage changes tend to be clustered in the beginning of the year, with wages being set for fixed durations of typically one year. This has been, in particular, documented in recent years for European countries using microeconomic data. Motivated by this evidence we build a model of uneven wage staggering, embedded in a standard DSGE model of the euro area, and investigate the monetary policy consequences of non-synchronised wage-setting. The model has the potential to generate responses to monetary policy shocks that differ according to the timing of the shock. Using a realistic calibration of the seasonality in wage-setting, based on a wide survey of European firms, the quantitative difference across quarters turns out however to be moderate. Relatedly, we obtain that the optimal monetary policy rule does not vary much across quarters.

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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 477.

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Length: 44 pages
Date of creation: 16 Aug 2013
Date of revision:
Handle: RePEc:boe:boeewp:0477

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Keywords: Wage-setting; wage-staggering; wage synchronisation; monetary policy shocks; optimal simple monetary policy rules;

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