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Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment

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  • Jordi Galí

Abstract

I revisit the General Theory's discussion of the role of wages in employment determination through the lens of the New Keynesian model. The analysis points to the key role played by the monetary policy rule in shaping the link between wages and employment, and in determining the welfare impact of enhanced wage flexibility. I show that the latter is not always welfare improving.

Suggested Citation

  • Jordi Galí, 2015. "Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment," Working Papers 662, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:662
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    1. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1379-1399, November.
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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