Fixed wage contracts and monetary non-neutrality

Maria Björklund, Mikael Carlsson and Oskar Nordström Skans

We study the importance of wage rigidities for the monetary policy transmission mechanism. Using uniquely rich micro data on Swedish wage negotiations, we isolate periods when the labor market is covered by fixed wage contracts. Importantly, negotiations are coordinated in time but their seasonal patterns are far from deterministic. Using a VAR model, we document that monetary policy shocks have a substantially larger impact on production during fixed wage episodes as compared to the average response. The results are not driven by the periodic structure, nor the seasonality, of the renegotiation episodes.

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Year of publication:	August 2016
Authors:	Björklund, Maria ; Carlsson, Mikael ; Nordström Skans, Oskar
Publisher:	Uppsala, Sweden : Department of Economics, Uppsala University
Subject:	Monetary Policy \| Wages \| Nominal rigidities \| Micro-data \| Geldpolitik \| Monetary policy \| Lohnrigidität \| Wage rigidity \| Theorie \| Theory \| Preisrigidität \| Price stickiness \| Neutralität des Geldes \| Neutrality of money \| Lohn