https://basilhalperin.com/essays/sticky-prices-vs-sticky-wages.html
TLDR:
Intuitively, wage stickiness seems more important than price stickiness
The first microfounded ‘new Keynesian’ models did use wage stickiness, not price stickiness; but in the mid-1980s there was a transition to sticky price models, which dominate today
But that transition was based on a set of arguments which today are regarded as wrong!
The policy implication: Taking wage stickiness seriously implies we should ensure stable nominal wage growth, not stable price inflation
Create your profile
Only paid subscribers can comment on this post
Check your email
For your security, we need to re-authenticate you.
Click the link we sent to , or click here to sign in.