NOTES FOR A NEW GUIDE TO KEYNES (I): WAGES, AGGREGATE DEMAND, AND EMPLOYMENT | Zendy

Gali Jordi | Zendy

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NOTES FOR A NEW GUIDE TO KEYNES (I): WAGES, AGGREGATE DEMAND, AND EMPLOYMENT

Author(s) -

Gali Jordi

Publication year - 2013

Publication title -

journal of the european economic association

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.792

H-Index - 93

eISSN - 1542-4774

pISSN - 1542-4766

DOI - 10.1111/jeea.12032

Subject(s) - economics , welfare , aggregate demand , flexibility (engineering) , wage , full employment , new keynesian economics , labour economics , effective demand , keynesian economics , real wages , aggregate (composite) , monetary policy , macroeconomics , unemployment , market economy , materials science , composite material , management

I revisit the General Theory ’s discussion of the role of wages in employment determination through the lens of the New Keynesian model. The analysis points to the key role played by the monetary policy rule in shaping the link between wages and employment, and in determining the welfare impact of enhanced wage flexibility. I show that the latter is not always welfare improving.

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