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Nominal Wage Rigidity in an Optimizing Model of an Open Economy

We build a dynamic general equilibrium model of a semi-small open economy in which staggered wage contracts are the only source of nominal rigidity. The model is capable of generating highly variable real and nominal exchange rates while predicting relative variabilities of prices and consumption that are broadly compatible with the data. The model also generates a high degree of persistence of nominal and real exchange rates. Nous élaborons un modèle dynamique d'équilibre général d'une petite économie ouverte où les contrats de salaire sont la seule source de rigidités nominales. Le modèle est capable d'engendrer des taux de change nominal et réel très variable tout en engendrant des variabilités des prix et de la consommation qui sont comparables aux données. Le modèle génère également un degré élevé de persistance des taux de change nominal et réel.

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Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 94.

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Length: 33 pages
Date of creation: Oct 1999
Handle: RePEc:cre:crefwp:94
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