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Discussion Paper Details

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Title: International Interdependence and Policy Coordination in Economies with Real and Nominal Wage Rigidity

Author(s): Frederick van der Ploeg

Publication Date: December 1987

Keyword(s): Fiscal Policy, Floating Exchange Rates, Monetary Policy, OECD, Policy Coordination, Supply-Side Policy and Wage Rigidity

Programme Area(s): International Macroeconomics

Abstract: The development of the seven main OECD economies during the 1970s and 1980s is discussed. Subsequently, wage equations of the error-correction type for the seven largest OECD economies are estimated. The hypothesis of real wage rigidity cannot be rejected for the French, German, Italian and Japanese economies, but the Canadian, United Kingdom and United States economies display a significant degree of nominal wage rigidity. An analytical two-country model with floating exchange rates, uncovered interest parity, imperfect substitution between home and foreign goods, and sluggish labor markets is then formulated.

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Bibliographic Reference

van der Ploeg, F. 1987. 'International Interdependence and Policy Coordination in Economies with Real and Nominal Wage Rigidity'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=217