Abstract
An unanticipated permanent increase in wage pressure is analyzed in a dynamic general-equilibrium model combining standard theory of capital accumulation and monopolistic wage setting. The long-run (steady-state) implications are identical percentage reduction in employment, consumption, and capital stock whereas wages and the real interest rate are unchanged. The reduction in employment on impact is larger than the steady-state reduction whereas wages rise and the real interest rate declines on impact
| Original language | English |
|---|---|
| Journal | Journal of Economics |
| Volume | 69 |
| Issue number | 2 |
| Pages (from-to) | 141-157 |
| ISSN | 0931-8658 |
| DOIs | |
| Publication status | Published - 1999 |