Non-Uniform Wage-Staggering: European Evidence and Monetary Policy Implications

44 Pages Posted: 20 Aug 2013

See all articles by Michel Juillard

Michel Juillard

Banque de France - Economic Study and Research Division

Hervé le Bihan

Banque de France - Centre de Recherche

Stephen Millard

Bank of England

Multiple version iconThere are 2 versions of this paper

Date Written: August 16, 2013

Abstract

In many countries, wage changes tend to be clustered in the beginning of the year, with wages being set for fixed durations of typically one year. This has been, in particular, documented in recent years for European countries using microeconomic data. Motivated by this evidence we build a model of uneven wage staggering, embedded in a standard DSGE model of the euro area, and investigate the monetary policy consequences of non-synchronised wage-setting. The model has the potential to generate responses to monetary policy shocks that differ according to the timing of the shock. Using a realistic calibration of the seasonality in wage-setting, based on a wide survey of European firms, the quantitative difference across quarters turns out however to be moderate. Relatedly, we obtain that the optimal monetary policy rule does not vary much across quarters.

Keywords: wage-setting, wage-staggering, wage synchronisation, monetary policy shocks, optimal simple monetary policy rules

JEL Classification: E27, E52

Suggested Citation

Juillard, Michel and Le Bihan, Herve and Millard, Stephen, Non-Uniform Wage-Staggering: European Evidence and Monetary Policy Implications (August 16, 2013). Bank of England Working Paper No. 477. Available at SSRN: https://ssrn.com/abstract=2313030 or http://dx.doi.org/10.2139/ssrn.2313030

Michel Juillard

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

Herve Le Bihan

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
Room 41-1391
75049 Paris Cedex 01
France

Stephen Millard (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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