Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment
I revisit the General Theory's discussion of the role of wages in employment determination through the lens of the New Keynesian model. The analysis points to the key role played by the monetary policy rule in shaping the link between wages and employment, and in determining the welfare impact of enhanced wage flexibility. I show that the latter is not always welfare improving.
Delivered as the Presidential Address to the 27th Annual Congress of the European Economic Association, held in Málaga, August 27-31, 2012. I thanks participants at the EEA Congress, the EABCN Workshop, Bilkent University, Moneda y Crédito Symposium, and the CREI Macro Lunch, as well as an anonymous referee for useful comments and suggestions. I acknowledge financial support from the Ministerio de Ciencia e Innovación (ECO2011-23188). The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
NOTES FOR A NEW GUIDE TO KEYNES (I): WAGES, AGGREGATE DEMAND, AND EMPLOYMENT Jordi Gali Article first published online: 12 SEP 2013 DOI: 10.1111/jeea.12032 © 2013 by the European Economic Association Issue Journal of the European Economic Association Journal of the European Economic Association Volume 11, Issue 5, pages 973–1003, October 2013 citation courtesy of