Inflation and unemployment affect wage rigidity, Icelandic authors find

Research challenges New Keynesian assumption that timings of wage changes are exogenous

Central Bank of Iceland
The Central Bank of Iceland

Two Icelandic economists present evidence that nominal wage rigidity is determined endogenously, in contrast to standard New Keynesian models, in a paper published in the Journal of Monetary Economics.

Rannveig Sigurdardottir, deputy chief economist at the Central Bank of Iceland, and Jósef Sigurdsson, formerly an economist at the central bank, study a unique set of administrative micro-data on the Icelandic labour market in their paper, Time-dependent or state-dependent wage-setting? Evidence

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