Affordable Access

Shocks and Frictions under Right-to-Manage Wage Bargaining: A Transatlantic Perspective

Authors
Disciplines
  • Economics

Abstract

Wirtschaftswissenschaftliches Zentrum (WWZ) der Universität Basel February 2010 Shocks and Frictions under Right-to-Manage Wage Bargaining: A Transatlantic Perspective WWZ Discussion Paper 2010/01 (SNF) Agostino Consolo, Matthias S. Hertweck The Author(s): Agostino Consolo European Central Bank Monetary Policy Strategy Division Kaiserstraße 29 DE – 60311 Frankfurt am Main [email protected] Matthias Hertweck Center of Business and Economics (WWZ) University of Basel Peter Merian-Weg 6 CH - 4002 Basel [email protected] www.hertweck.org A publication of the Center of Business and Economics (WWZ), University of Basel. © The author(s). Reproduction for other purposes than the personal use needs the permission of the author(s). Shocks and Frictions under Right-to-Manage Wage Bargaining: A Transatlantic Perspective∗ Agostino Consolo† Bocconi University & ECB Matthias S. Hertweck‡ University of Basel & IfW This Version: February 2, 2010 Abstract This paper introduces staggered right-to-manage wage bargaining into a New Keynesian business cycle model. Our key result is that the model is able to gener- ate persistent responses in output, inflation, and total labor input to both neutral technology and monetary policy shocks. Furthermore, we compare the model’s dy- namic behavior when calibrated to the US and to an European economy. We find that the degree of price rigidity explains most of the differences in response to a monetary policy shock. When the economy is hit by a neutral technology shock, both price and wage rigidities turn out to be important. JEL Codes: E24, E31, E32, J64 Keywords: Business Cycles, Labor Market Search, Wage Bargaining, Inflation ∗Without implication, we would like to thank István Kónya, Keith Kuest

There are no comments yet on this publication. Be the first to share your thoughts.