Series: IMF Working Papers
Author(s): Shekhar Aiyar , and Simon Voigts
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 23 August 2019
Keywords: Accounting systems, Bank rates, Bond yields, Business cycles, Capital, Capital stocks, Central banking, Central banks, Consumption, Cost of capital
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...