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  3. American Economic Journal: Macroeconomics
  4. April 2019
  5. Fixed-Wage Contracts and Monetary Non-neutrality

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Fixed-Wage Contracts and Monetary Non-neutrality

  • Maria Björklund
  • Mikael Carlsson
  • Oskar Nordström Skans
American Economic Journal: Macroeconomics
vol. 11, no. 2, April 2019
(pp. 171–92)
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Abstract

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 two-regime VAR model, we document that monetary policy shocks have a larger impact on production during fixed-wage episodes as compared to the average response. The results do not seem to be driven by the periodic structure, nor the seasonality, of the renegotiation episodes.

Citation

Björklund, Maria, Mikael Carlsson, and Oskar Nordström Skans. 2019. "Fixed-Wage Contracts and Monetary Non-neutrality." American Economic Journal: Macroeconomics 11 (2): 171–92. DOI: 10.1257/mac.20160213

Additional Materials

JEL Classification

  • E23 Macroeconomics: Production
  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • E52 Monetary Policy
  • J31 Wage Level and Structure; Wage Differentials
  • J41 Labor Contracts