Downward Wage Rigidity and Optimal Steady-state Ination *


>IJH=?J This paper examines the impact of downward wage rigidity (nominal and real) on optimal steady-state ination. For this purpose, we modify the Erceg, Henderson and Levin (2000) model by introducing menu costs for wage setting. We calibrate the relevant parameters by matching key features of the cross-sectional distribution of wage changes provided by… (More)