Hostname: page-component-cd9895bd7-fscjk Total loading time: 0 Render date: 2024-12-26T15:43:44.644Z Has data issue: false hasContentIssue false
  • English
  • Français

A NOTE ON THE UNIQUENESS OF STEADY-STATE EQUILIBRIUM UNDER STATE-DEPENDENT WAGE SETTING

Published online by Cambridge University Press:  17 June 2020

Shuhei Takahashi
Shuhei Takahashi*
Affiliation:
Kyoto University, CIGS
*
Address correspondence to: Shuhei Takahashi, Institute of Economic Research, Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501, Japan. e-mail: takahashi@kier.kyoto-u.ac.jp. Phone: +81-75-753-7153
Get access Rights & Permissions [Opens in a new window]

Abstract

Does wage setting exhibit strategic complementarity and produce multiple equilibria? This study constructs a discrete-time New Keynesian model in which households choose the timing of their wage adjustments endogenously subject to fixed wage-setting costs. I explore steady-state equilibrium of the state-dependent wage-setting model both analytically and numerically. For reasonable parameter values, complementarity in wage setting is weak and the steady-state equilibrium is unique.

Keywords

State-dependent Wage SettingNew Keynesian ModelMultiple EquilibriaStrategic Complementarity
Type
Note
Information
Macroeconomic Dynamics , Volume 26 , Issue 2 , March 2022 , pp. 533 - 544
Copyright
© Cambridge University Press 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I would like to thank William A. Barnett (the editor), two referees, and seminar and conference participants at the AEI Joint Workshop, Kobe University, China Meeting of the Econometric Society, International Conference on Computing in Economics and Finance, Australasian Meeting of the Econometric Society, Tohoku University, and European Meeting of the Econometric Society for their comments. I gratefully acknowledge financial support from Grant-in-Aid for Young Researchers (B) 17K13700, Grant-in-Aid for Scientific Research (B) 16H03626, Grant-in-Aid for Scientific Research (A) 16H02026, and the Zengin Foundation for Studies on Economics and Finance. Any errors are my own.

References

Ball, L. and D. Romer (1991) Sticky prices as coordination failure. American Economic Review 81(3), 539–552.Google Scholar
Blanchard, O. J. and N. Kiyotaki (1987) Monopolistic competition and the effects of aggregate demand. American Economic Review 77(4), 647–666.Google Scholar
Braun, A. R. and T. Nakajima (2012) Uninsured countercyclical risk: An aggregation result and application to optimal monetary policy. Journal of the European Economic Association 10(6), 1450–1474.CrossRefGoogle Scholar
Calvo, G. A. (1983) Staggered prices in a utility-maximizing framework. Journal of Monetary Economics 12(3), 383–398.CrossRefGoogle Scholar
Christiano, L. J., M. Eichenbaum and C. L. Evans (2005) Nominal rigidities and the dynamic effects of a shock to monetary policy. Journal of Political Economy 113(1), 1–45.CrossRefGoogle Scholar
Costain, J., Nakov, A. and Zarzalejos, B. P. (2019) Monetary policy implications of state-dependent prices and wages. ECB Working Paper 2272, April 2019.CrossRefGoogle Scholar
Daly, M. and B. Hobijn (2014) Downward nominal wage rigidities bend the Phillips curve. Federal Reserve Bank of San Francisco 2013-08.Google Scholar
Daly, M., Hobijn, B. and Lucking, B. (2012) Why has wage growth stayed strong? FRBSF Economic Letter 2012-11.Google Scholar
Dotsey, M., King, R. G. and Wolman, A. L. (1999) State-dependent pricing and the general equilibrium dynamics of money and output. Quarterly Journal of Economics 114(2), 655–690.CrossRefGoogle Scholar
Eijffinger, S. C., Grajales-Olarte, A. and Uras, O. R. (in press) Heterogeneity in wage setting behavior in a New-Keynesian model. Macroeconomic Dynamics.Google Scholar
Erceg, C. J., Henderson, D. W. and Levin, A. T. (2000) Optimal monetary policy with staggered wage and price contracts. Journal of Monetary Economics 46(2), 281–313.CrossRefGoogle Scholar
Huang, K. X. D. and Z. Liu (2002) Staggered price-setting, staggered wage-setting, and business cycle persistence. Journal of Monetary Economics 49(2), 405–433.CrossRefGoogle Scholar
John, A. A. and A. L. Wolman (2004) An inquiry into the existence and uniqueness of equilibrium with state-dependent pricing. Federal Reserve Bank of Richmond Working Paper 4(4).Google Scholar
John, A. A. and A. L. Wolman (2008) Steady-state equilibrium with state dependent pricing. Journal of Monetary Economics 55(2), 383–405.CrossRefGoogle Scholar
Kaplan, G., Moll, B. and Violante, G. (2018) Monetary policy according to HANK. American Economic Review 108(3), 697–743.CrossRefGoogle Scholar
Takahashi, S. (2017) State dependency in price and wage setting. International Journal of Central Banking 13(1), 151–189.Google Scholar
Taylor, J. B. (1980) Aggregate dynamics and staggered contracts. Journal of Political Economy 88(1), 1–23.CrossRefGoogle Scholar
Taylor, J. B. (1999) Staggered price and wage setting in macroeconomics. In J. B. Taylor and M. Woodford (eds.), Handbook of Macroeconomics, Vol. 1B, pp. 1009–1050. Amsterdam: Elsevier Science B.V.CrossRefGoogle Scholar
Supplementary material: File

Takahashi supplementary material

Takahashi supplementary material

Download Takahashi supplementary material(File)
File 88.9 KB