Monetary policy and macroeconomic stability under alternative demand regimes

In this paper we analyse the interaction of macroeconomic activity and the dynamics of real wages from a theoretical perspective. By means of a system-dynamic approach we investigate the economic viability of wage- and profit-led demand regimes by analysing not only the effect of real wages on outpu...

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Bibliographic Details
Published in:Cambridge journal of economics 2011-05, Vol.35 (3), p.569-585
Main Authors: Proaño, Christian R., Flaschel, Peter, Krolzig, Hans-Martin, Diallo, Mamadou Bobo
Format: Article
Language:English
Subjects:
Aggregate demand
Demand
Economic growth models
Economic models
Economic systems
Economic theory
Economics
Income distribution
Macroeconomic modeling
Macroeconomics
Monetary economics
Monetary policy
Procyclicality
Profits
Real wages
Stabilization policy
Studies
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Summary:In this paper we analyse the interaction of macroeconomic activity and the dynamics of real wages from a theoretical perspective. By means of a system-dynamic approach we investigate the economic viability of wage- and profit-led demand regimes by analysing not only the effect of real wages on output, but also the feedback mechanisms of macroeconomic activity on the real wages. Furthermore, in this context, we focus on the role of monetary policy as a macroeconomic stabilisation mechanism in the two mentioned demand regimes.
ISSN:0309-166X
1464-3545
DOI:10.1093/cje/beq031