We analyze the welfare impact of greater wage flexibility while taking into account explicitly the existence of the zero lower bound (ZLB) constraint on the nominal interest rate. We show that the ZLB constraint generally amplifies the adverse effects of greater wage flexibility on welfare when...

cover -- Contents -- Series Foreword -- Preface -- Introduction -- A Simple Model of Unemployment and Inflation Dynamics -- Unemployment, the Output Gap, and the Welfare Costs of Economic Fluctuations -- Unemployment and Monetary Policy Design in the New Keynesian Model -- Concluding Remarks and...