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Monetary Policy Effects in Developing Countries with Minimum Wages

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  • Kodama, Masahiro

Abstract

Using a Dynamic General Equilibrium (DGE) model, this study examines the effects of monetary policy in economies where minimum wages are bound. The findings show that the monetary-policy effect on a binding-minimum-wage economy is relatively small and quite persistent. This result suggests that these two characteristics of monetary policy in the minimum-wage model are rather different from those in the union-negotiation model which is often assumed to account for industrial economies.

Suggested Citation

  • Kodama, Masahiro, 2008. "Monetary Policy Effects in Developing Countries with Minimum Wages," IDE Discussion Papers 142, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper142
    as

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    File URL: https://ir.ide.go.jp/record/38025/files/IDP000142_001.pdf
    File Function: First version, 2008
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    References listed on IDEAS

    as
    1. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 127-159.
    2. Benassy, Jean-Pascal, 1995. "Money and wage contracts in an optimizing model of the business cycle," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 303-315, April.
    3. Fuhrer, Jeffrey C., 2010. "Inflation Persistence," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 9, pages 423-486, Elsevier.
    4. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    5. S. Fischer, 1975. "Long-Term Contracts, Rational Expectations and the Optimal Money Supply Rule," Working papers 166, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monetary policy; Sticky wage; Business cycles; Developing countries; Minimum wages; 金融政策; 硬直賃金; 景気; 発展途上国; 最低賃金;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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