Economic thought through the prism of new keynesian economics

Nikoloski, Krume and Aleksoski, Ognen and Petrusheva, Borka (2015) Economic thought through the prism of new keynesian economics. Annals of the „Constantin Brâncuşi” University of Târgu Jiu, 1 (1). pp. 17-21. ISSN 2344 3685

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In this paper I study the relation between real wage rigidity and nominal price and wage rigidities. We formulate a
generalized price-setting framework that incorporates staggered contracts of multiple durations and that enables us to
directly identify the influences of nominal vs. real rigidities. We also find that new contracts exhibit very low sensitivity
to marginal cost, corresponding to a relatively high degree of real rigidity. For instance, in models focused on labour
contracts, wages are regarded as an „insurance” provided by the employer to the workers, while in efficiency wage
models, wages are determinants of labour productivity. Such models have the ability to account for unemployment, but
they are not able to explain the failure of the classical dichotomy.
Keywords: nominal rigidities, real rigidities, efficiency wages, unemployment
Clasificare JEL : B00, B22, N1

Item Type: Article
Subjects: Social Sciences > Economics and business
Divisions: Faculty of Economics
Depositing User: Krume Nikoloski
Date Deposited: 17 Nov 2015 12:29
Last Modified: 17 Nov 2015 12:29

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