TY  - BOOK
AU  - Galí,Jordi
AU  - Monacelli,Tommaso
ED  - National Bureau of Economic Research.
TI  - Understanding the Gains from Wage Flexibility: The Exchange Rate Connection 
T2  - NBER working paper series
PY  - 2016///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - August 2016; Hardcopy version available to institutional subscribers
N2  - We study the gains from increased wage flexibility using a small open economy model with staggered price and wage setting. Two results stand out: (i) the effectiveness of labor cost reductions as a means to stimulate employment is much smaller in a currency union, (ii) an increase in wage flexibility often reduces welfare, more likely so in an economy that is part of a currency union or with an exchange rate-focused monetary policy. Our findings call into question the common view that wage flexibility is particularly desirable in a currency union
UR  - https://www.nber.org/papers/w22489
UR  - http://dx.doi.org/10.3386/w22489
ER  -