Understanding the Gains from Wage Rigidity in a Currency Union with Default Risk: Focusing on the Relationship between Terms of Trade and Fiscal Balance

2022 Fiscal Year Final Research Report

• Project/Area Number: 19K01755
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Review Section: Basic Section 07060:Money and finance-related
• Research Institution: Nagoya City University
• Principal Investigator: OKANO Eiji 名古屋市立大学, 大学院経済学研究科, 教授 (20406713)
• Project Period (FY): 2019-04-01 – 2023-03-31
• Keywords: 賃金硬直性 / 経済厚生 / 共通通貨圏

Outline of Final Research Achievements

This study analyzes how wage rigidity affects social welfare, by exploiting dynamic general equilibrium and focusing on the relationship between changes in the terms of trade and fiscal balance. Even in previous works, similar to this study, how wage rigidity affects social welfare, by exploiting the framework adopted by this study. Although previous works focus on changes in the terms of trade, however, those do focus on fiscal balance. Because of this, how fiscal balance affects the relationship between wage rigidity and social welfare is not considered. To consider this and analyze, unlike those previous works, the model in this study includes government budget constraint with endogenous fiscal feed back rule like Bohn rule explicitly. This study has succeeded to show that wage flexibility enhances social welfare in many cases, although previous works showed that wage flexibility does not necessary enhance social welfare in a currency union.

Free Research Field

国際金融論

Academic Significance and Societal Importance of the Research Achievements

先行研究では共通通貨圏において賃金伸縮性は必ずしも経済厚生を高めることではないと主唱されている。本研究では政府を明示的にモデルに取り込むことで、先行研究とは異なり賃金伸縮性は経済厚生を高めることを示した。金融政策は財政政策と共に考えることでより現実的な政策的含意が得られるとするならば、現実的な政策的含意が得られたという点で本研究の成果は大いに意義があると言える。