Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment

39 Pages Posted: 22 Dec 2012

See all articles by Jordi Galí

Jordi Galí

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: 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.

Suggested Citation

Gali, Jordi, Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment (December 2012). NBER Working Paper No. w18651, Available at SSRN: https://ssrn.com/abstract=2192824

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Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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