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

40 Pages Posted: 1 Feb 2013

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: January 2013

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: employment stability, Monetary policy rules, Wage flexibility

JEL Classification: E32

Suggested Citation

Gali, Jordi, Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment (January 2013). CEPR Discussion Paper No. DP9285. Available at SSRN: https://ssrn.com/abstract=2210255

Jordi Gali (Contact Author)

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

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HOME PAGE: http://www.econ.upf.es/~gali

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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