Optimal wage re-negotiation in a closed and open economy

Joshua Aizenman

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

This paper investigates an economy in which there are short-term wage contracts that are re-negotiated under certain conditions. The paper determines the optimal frequency of wage re-negotiation and shows that it depends positively on measures of aggregate variability and Phillips curve slope. The role of optimal wage re-negotiation is to mitigate the output effects of various shocks. In the context of an open economy, it is shown that the desirable exchange rate regime in an economy with optimal wage re-negotiation depends on the stochastic structure of the economy.

Original languageEnglish
Pages (from-to)251-262
Number of pages12
JournalJournal of Monetary Economics
Volume13
Issue number2
DOIs
StatePublished - 1 Jan 1984
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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