Does it matter for the propagation mechanism following nominal shocks whether nominal rigidities are specified as sticky wages instead of sticky prices? We analyze the question in a standard dynamic general equilibrium "new open macro-economy" model, which is solved analytically. By comparing...

Nominal rigidities imply that monetary neutrality is broken, but can they also account for persistent effects of nominal shocks? One possible propagation mechanism may arise from the fact that nominal price and wage decisions are not coordinated in a decentralized economy, but made by numerous...

How does the asymmetry of labor market institutions affect the adjustment of a currency union to shocks? To answer this question, this paper sets up a dynamic currency union model with monopolistic competition and sticky prices, hiring frictions and real wage rigidities. In our analysis, we...

How does the asymmetry of labor market institutions affect the adjustment of a currency union to shocks? To answer this question, this paper sets up a dynamic currency union model with monopolistic competition and sticky prices, hiring frictions and real wage rigidities. In our analysis, we...

This paper asks the following two questions: First, can a model with nominal rigidities in wage and price setting account for the average welfare costs of business cycle fluctuations identified in Gali, Gertler, and Lopez-Salido (2003)? Second, do we need to agree on a particular scheme for...