Gregory de Walque

Federal Reserve Bank Of Philadelphia, Philadelphia, Pennsylvania, United States

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Publications (15)4.44 Total impact

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    Alain de Crombrugghe, Gregory de Walque
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    ABSTRACT: Most transition countries used tax‐supported wage norms in the early 1990s, as a part of their market liberalization programmes. This article analyses how a firm‐level tax (or subsidy) on deviations from a pre‐set wage norm may promote employment by rotating the labour demand curve perceived by the workers’ union around the value of the norm. We derive the conditions under which it yields a positive employment effect. We test the effect of the norm on the wages on a sample of Polish firms in 1990 and 1991. The data support the role of the wage norm on the position of the perceived labour demand curve and the role of the tax rate on its slope.
    Economics of Transition 07/2011; 19(3):541-561. · 0.68 Impact Factor
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    ABSTRACT: This paper investigates the macroeconomic relevance of new findings regarding nominal wage stickiness, wage indexation, wage staggering and synchronisation, and downward nominal and real wage rigidity in the euro area. Quantifying the relevance of this evidence for monetary policy remains to be fully resolved, but our results suggest that countries with lower indexation and higher wage stickiness for newly hired workers experience higher employment volatility and lower inflation volatility, and that wage staggering and synchronisation of wage changes in particular months result in less persistence in real wages and inflation. (JEL: E24, E52) (c) 2010 by the European Economic Association.
    Journal of the European Economic Association 01/2010; 8(2-3):506-513. · 1.36 Impact Factor
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    ABSTRACT: In a search and matching environment, this paper assesses a range of modeling setups against macro evidence for the monetary transmission mechanism in the euro area. In particular, we assess right-to-manage vs. efficient bargaining, flexible vs. sticky wages, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour imply a sufficient degree of real rigidity, and so can reproduce inflation dynamics well. However, they imply too small a response on the employment margin. The other model variants fit employment dynamics better, but then imply too little real rigidity and, so, too volatile inflation, owing to strong responses of marginal wages and hours per employee. Further sources of real rigidities - possibly from outside of the labour market - seem to be needed to simultaneously explain the responses of wages, inflation and employment.
    08/2009;
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    ABSTRACT: This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates.
    03/2009;
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    ABSTRACT: We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers’ bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers’ bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility. JEL Classification: E31, E32, E52, J64.
    03/2009;
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    ABSTRACT: We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers' bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility.
    02/2009;
  • David de la Croix, Raf Wouters, Gregory de Walque
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    ABSTRACT: We build a RBC endogenous separation matching model and introduce efficiency wages along the lines of Akerlof (1982). While the standard endogenous separation matching model reveals shortcomings in explaining correlations and volatilities jointly, this approach performs reasonably well along both dimensions. The proper introduction of real rigidities can consistently enhance the performance of the (endogenous separation) matching model
    Macroeconomic Dynamics 01/2009; 13(05):673-684. · 0.45 Impact Factor
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    Gregory de Walque, Olivier Pierrard, Abdelaziz Rouabah
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    ABSTRACT: This paper develops a dynamic stochastic general equilibrium model with interactions between an heterogeneous banking sector and other private agents. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbankmarket. Our aim is to understand the importance of supervisory and monetary authorities to restore financial stability. The model is calibrated against real data and used for simulations. We show that liquidity injections reduce financial instability but have ambiguous effects on output fluctuations. The model also confirms the partial equilibrium literature results on the procyclicality of Basel II.
    11/2008;
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    ABSTRACT: This paper analyzes the role of standing facilities in the determination of the demand for reserves in the overnight money market. In particular, we study how the asymmetric nature of the deposit and lending facilities could be used as a powerful policy tool for the simultaneous control of prices and quantities in the market for daily funds.
    Central Bank of Luxembourg, BCL working papers. 01/2008;
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    ABSTRACT: In this paper, we propose a search and matching model with nominal stickiness à la Calvo in the wage bargaining. We analyze the properties of the model, first, in the context of a typical real business cycle model driven by stochastic productivity shocks and second, in a fully specified monetary DSGE model with various real and nominal rigidities and multiple shocks. The model generates realistic statistics for the important labor market variables
    11/2006;
  • Frank Rafael Smets, Raf Wouters, Gregory de Walque
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    ABSTRACT: Smets and Wouters (2003) find that at short- and medium-term horizons stochastic variations in the goods market mark-up are the most important source of inflation variability in the euro area. This article shows that an empirically plausible alternative interpretation is that the estimated price mark-up shocks represent relative price (e.g. productivity) shocks in a flexible-price sector. Such an interpretation is consistent with recent micro findings that prices are very flexible in some sectors such as the food and energy sector, while they are very sticky in other sectors such as services. (JEL codes: E1, E2, E3) Copyright 2006, Oxford University Press.
    CESifo Economic Studies 02/2006; 52(1):153-176. · 0.62 Impact Factor
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    Gregory de Walque, Frank Smets, Rafael Wouters
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    ABSTRACT: Using Bayesian likelihood methods, this paper estimates a dynamic stochastic general equilibrium model with Taylor contracts and firm-specific factors in the goods market on euro-area data. The paper shows how the introduction of firmspecific factors improves the empirical fit of the model and reduces the estimated contract length to a duration of four quarters, which is more consistent with the empirical evidence on average price durations in the euro area. However, in order to obtain this result, the estimated real rigidity is very large, either in the form of a very large constant elasticity of substitution between goods or in the form of an endogenous elasticity of substitution that is very sensitive to the relative price. Finally, the paper also investigates the implications of these estimates for the distribution of prices and quantities across the various goods sectors.
    International Journal of Central Banking. 01/2006; 2(3).
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    G. de Walque, F. Smets, R. Wouters
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    ABSTRACT: This paper compares a number of alternative specifications for price setting in the context of the Smets-Wouters (2003) Dynamic Stochastic General Equilibrium model. We compare the Calvo model with a standard Taylor contracting model and show that by allowing for sector-specific capital the Taylor contracting model with relative short contract length is performing as well as the Calvo model
    12/2005;
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    Grégory de Walque
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    ABSTRACT: The paper presents a nonexhaustive survey of the literature designed to explain emergence, size and political sustainability of pay-as-you-go pension systems. It proposes a simple framework of analysis (a small, open, two overlapping generation economy model), around which some variants are displayed. Dictatorship of the median voter is assumed. The text is organized to answer the following questions: (i) Do political equilibria with PAYG pension schemes exist? (ii) Why do they emerge? (iii) What are the conditions for the participation constraint of the pension game to be verified?, and finally, (iv) What is the size of the pension system chosen by the median voter and how is this size influenced by an exogenous (e.g. demographic) shock? Copyright Blackwell Publishers Ltd, 2005.
    Journal of Economic Surveys 01/2005; 19(2):181-209. · 1.33 Impact Factor
  • Gregory de Walque, Frank Smets, Raf Woutersy
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    ABSTRACT: This paper develops an open economy DSGE model with sticky prices and wages linking the euro area and the US economy. The model is estimated with Bayesian tech- niques using ten country-speci…c macroeconomic variables for each economy together with oil prices and the euro/dollar exchange rate. The introduction of a complete set of domestic and open economy shocks allows for an empirical investigation of their con- tribution to the business cycle ‡uctuations in output, trade balance and exchange rate. The spill-over eects depend crucially on the elasticity of substitution. The empirical …t results in similar probabilities for high and low values of this parameter. The re- strictions that are imposed by the UIRP condition on the reaction of the model to the various shocks are not supported by the data.