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Extending the NAWM with a partial indexation mechanism linking wages and trend productivitiy

Author

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  • Coenen, Gunter

Abstract

This document sets out the details for extending the wage Phillips curve of the New Area-Wide Model (NAWM; cf. Christoffel, Coenen and Warne, 2008) with a partial indexation mechanism linking wages to trend productivity developments. The document first outlines the labour-market setting in which households are offering their labour services. It then derives the first-order condition characterising the optimal wage-setting decision of an individual household as well as the law of motion for the aggregate wage index. Finally, the document derives the implied log-linear wage Phillips curve. An appendix provides additional technical details of the derivations.

Suggested Citation

  • Coenen, Gunter, 2009. "Extending the NAWM with a partial indexation mechanism linking wages and trend productivitiy," MPRA Paper 86153, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:86153
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    File URL: https://mpra.ub.uni-muenchen.de/86153/1/MPRA_paper_86153.pdf
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    Cited by:

    1. Coenen, Günter & Karadi, Peter & Schmidt, Sebastian & Warne, Anders, 2018. "The New Area-Wide Model II: an extended version of the ECB’s micro-founded model for forecasting and policy analysis with a financial sector," Working Paper Series 2200, European Central Bank.

    More about this item

    Keywords

    DSGE modelling; Bayesian inference; forecasting; policy analysis; euro area;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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