Journal Description Editorial Committee How to Subscribe Forthcoming Articles Staff Papers Archive Copyright Information Research at the IMF Free Email Notification Receive emails when we post new
items of interest to you.
|
|
|
|
High Inflation and Real Wages Benedikt Braumann Full Text of this Article (PDF 359K) Abstract: 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 credit channel of monetary transmission. 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. |
