Wage Moderation in Crises: Policy Considerations and Applications to the Euro Area
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Summary:
The paper studies the impacts of wage moderation in the euro area. Simulation results show that if a single euro area crisis-hit economy undertakes wage moderation, the impact on output is positive for that economy and for the entire euro area. If all crisis-hit economies undertake wage moderation together, their output still expands, albeit to a lesser degree. If the wage moderation is accompanied by cuts in policy interest rates by the central bank—and by quantitative easing once interest rates hit the zero lower bound—then output for the entire euro area expands as well.
Series:
Staff Discussion Notes No. 2015/022
Subject:
Financial services Labor Real interest rates Real wages Wage adjustments Wage bargaining Wages
English
Publication Date:
November 17, 2015
ISBN/ISSN:
9781513537009/2617-6750
Stock No:
SDNEA2015022
Pages:
36
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