Wage Moderation in Crises
( Staff Discussion Notes )
Publication series ： Staff Discussion Notes
Author： Mr. Jörg Decressin Raphael A. Espinoza Mr. Ioannis Halikias Mr. Michael Kumhof Mr. Daniel Leigh Mr. Prakash Loungani Paulo A. Medas Susanna Mursula Mr. Antonio Spilimbergo TengTeng Xu
Publisher： INTERNATIONAL MONETARY FUND
Publication year： 2015
E-ISBN: 9781513519302
Subject： F0 Economics;F8 Finances
Language： ENG
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Description
The paper studies the impacts of wage moderation in the euro area. Simulation results show that if a single euro area crisis-hit economy undertakes wage moderation, the impact on output is positive for that economy and for the entire euro area. If all crisis-hit economies undertake wage moderation together, their output still expands, albeit to a lesser degree. If the wage moderation is accompanied by cuts in policy interest rates by the central bank-and by quantitative easing once interest rates hit the zero lower bound-then output for the entire euro area expands as well.