Department of Economics and Business - Universitat Pompeu Fabra

Title:: Notes for a new guide to Keynes (I): Wages, aggregate demand, and employment
Author:: Jordi Galí
Date:: September 2012 (Revised: December 2012)
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.
Keywords:: wage flexibility, monetary policy rules, employment stability.
JEL codes:: E32
Area of Research:: Macroeconomics and International Economics

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