The Negative Mean Output Gap /

We argue that in an economy with downward nominal wage rigidity, the output gap is negative on average. Because it is more difficult to cut wages than to increase them, firms reduce employment more during downturns than they increase employment during expansions. This is demonstrated in a simple New...

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Bibliografske podrobnosti
Glavni avtor: Aiyar, Shekhar
Drugi avtorji: Voigts, Simon
Format: Revija
Jezik:English
Izdano: Washington, D.C. : International Monetary Fund, 2019.
Serija:IMF Working Papers; Working Paper ; No. 2019/183
Online dostop:Full text available on IMF
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100 1 |a Aiyar, Shekhar. 
245 1 4 |a The Negative Mean Output Gap /  |c Shekhar Aiyar, Simon Voigts. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 2019. 
300 |a 1 online resource (24 pages) 
490 1 |a IMF Working Papers 
500 |a <strong>Off-Campus Access:</strong> No User ID or Password Required 
500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a We argue that in an economy with downward nominal wage rigidity, the output gap is negative on average. Because it is more difficult to cut wages than to increase them, firms reduce employment more during downturns than they increase employment during expansions. This is demonstrated in a simple New Keynesian model with asymmetric wage adjustment costs. Using the model's output gap as a benchmark, we further show that common output gap estimation methods exhibit a systematic bias because they assume a zero mean. The bias is especially large in deep recessions when potential output tends to be most severely underestimated. 
538 |a Mode of access: Internet 
700 1 |a Voigts, Simon. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2019/183 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2019/183/001.2019.issue-183-en.xml  |z IMF e-Library