High Inflation and Real Wages, Issues 2001-2050

Front Cover
International Monetary Fund, Western Hemisphere Department, May 1, 2001 - Business & Economics - 23 pages
0 Reviews
Empirical data show that real wages fall sharply during periods of high inflation. This paper suggests a simple general equilibrium explanation, without relying on nominal rigidities. It presents an intertemporal two-sector model with a cash-in-advance constraint. In this setting, inflation reduces real wages through (1) a decline of the capital stock, and (2) a shift in relative prices. The two effects are additive and make the decline in real wages exceed the decline in per-capita GDP. This mechanism may contribute to rising poverty during periods of high inflation.

From inside the book

What people are saying - Write a review

We haven't found any reviews in the usual places.

Contents

Introduction
3
Intuition
5
The Model
6
Copyright

4 other sections not shown

Other editions - View all

Common terms and phrases

Bibliographic information