Year: 1985
Author: Rosner, Peter, Tintner, Gerhard, Wörgötter, Andreas, Wörgötter, Gabriele
Credit and Capital Markets – Kredit und Kapital, Vol. 18 (1985), Iss. 3 : pp. 299–319
Abstract
Wage Restraint under Fixed and Variable Exchange Rates
On the basis of the model of R. Dornbusch (1983) it is examined how distributionneutral, income policy measures (i.e, simultaneous diminution of wage and price increases of the same extent) have short and medium term effects on the real activity level of a small, open economy. In the case of fixed exchange rates it can be shown unequivocally that wage restraint inthe above-described sense results in amedium-term output increase, but in the short run further aggravates the underutilization of capacity. Under flexible exchange rates, there is no change in the medium-term effects of wage restraint compared to a system of fixed exchange rates, but the short-term reactions may very well change. A divergence of short and medium term output reactions need not necessarily occur. In conclusion it is discussed how far wage restraint is a suitable means of combatting a real increase in foreign interest rates. It is found that under fixed exchange rates medium-term output stabilization is any case atthe expense of short-termreal activity. The same must also be expected for flexible exchange rates, though this cannot be demonstrated definitively.
Journal Article Details
Publisher Name: Global Science Press
Language: Multiple languages
DOI: https://doi.org/10.3790/ccm.18.3.299
Credit and Capital Markets – Kredit und Kapital, Vol. 18 (1985), Iss. 3 : pp. 299–319
Published online: 1985-03
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 21
Author Details
-
Rosner, P., Tintner, G., Wörgötter, A., Wörgötter, G. (1984): Lohnbestimmung, außenwirtschaftliche Stabilität und internationale Stagnation. Jahrbücher für Nationalökonomie und Statistik, Vol. 199/3, 193 – 212.
Google Scholar -
Dornbusch, R. (1983): Flexible Exchange Rates and Interdependence. International Monetary Fund Staff Papers, Vol. 30 (1), pp. 3 – 30.
Google Scholar -
Holtfrerich, C.-L. (1982): Wechselkurssystem und Phillipskurve. Kredit und Kapital, Vol. 15 (1), pp. 65 – 89.
Google Scholar