A NOTE ON THE UNIQUENESS OF STEADY-STATE EQUILIBRIUM UNDER STATE-DEPENDENT WAGE SETTING

MACROECONOMIC DYNAMICS（2022）

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Abstract

Does wage setting exhibit strategic complementarity and produce multiple equilibria? This study constructs a discrete-time New Keynesian model in which households choose the timing of their wage adjustments endogenously subject to fixed wage-setting costs. I explore steady-state equilibrium of the state-dependent wage-setting model both analytically and numerically. For reasonable parameter values, complementarity in wage setting is weak and the steady-state equilibrium is unique.

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Key words

State-dependent Wage Setting, New Keynesian Model, Multiple Equilibria, Strategic Complementarity

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