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

Author

Listed:
  • 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, 2012. "Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment," Working Papers 662, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:662
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    File URL: http://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/662.pdf
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    References listed on IDEAS

    as
    1. Galí, Jordi & Rabanal, Pau, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Post-War US Data?," CEPR Discussion Papers 4522, C.E.P.R. Discussion Papers.
    2. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
    3. Barnichon, Regis, 2010. "Productivity and unemployment over the business cycle," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 1013-1025, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    wage flexibility; monetary policy rules; employment stability;

    JEL classification:

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

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