() and Ingrid Kubin
Pasquale Commendatore: Università di Napoli 'Federico II'
Ingrid Kubin: Vienna University of Economics & B.A.
Abstract: Modern macroeconomic models with a Keynesian flavour usually involve nominal rigidities in wages and goods prices. A typical model is static and combines wage bargaining in the labour markets and monopolistic competition in the goods markets. As central policy implication it follows that deregulating labour and/or goods markets increases equilibrium employment. We reassess the consequences of deregulation in a dynamic model. It still increases employment at the fixed point, which corresponds to the static equilibrium solution. However, deregulation may also lead to stability loss and endogenous fluctuations.
JEL-codes: E1 May 2005
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