10.17889/E109506
Ricci, Luca Antonio
Benigno, Pierpaolo
Replication data for: The Inflation-Output Trade-Off with Downward Wage Rigidities
ICPSR Inter-university Consortium for Political and Social Research
2010
10.1257/aer.101.4.1436
10.1257/aer.101.4.1436
V0
The macroeconomic implications of downward nominal wage rigidities
are analyzed via a dynamic stochastic general equilibrium model
featuring aggregate and idiosyncratic shocks. A closed-form solution
for a long-run Phillips curve relates average output gap to average
wage inflation: it is virtually vertical at high inflation and flattens
at low inflation. Macroeconomic volatility shifts the curve outwards
and reduces output. The results imply that stabilization policies play
an important role, and that optimal inflation may be positive and differ
across countries with different macroeconomic volatility. Results
are robust to relaxing the wage constraint, for example, when large
idiosyncratic shocks arise. (JEL E23, E24, E31, E63)