Wage Moderation in Crises : Policy Considerations and Applications to the Euro Area

Author/Editor:

Jörg Decressin ; Raphael A Espinoza ; Ioannis Halikias ; Michael Kumhof ; Daniel Leigh ; Prakash Loungani ; Paulo A Medas ; Susanna Mursula ; Antonio Spilimbergo ; TengTeng Xu

Publication Date:

November 17, 2015

Electronic Access:

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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. 15/22

Subject:

English

Publication Date:

November 17, 2015

ISBN/ISSN:

9781513537009/

Stock No:

SDNEA2015022

Price:

$10.00 (Academic Rate:$10.00)

Format:

Paper

Pages:

36

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