Wages are the key to the business cycle

Source: EconLog
by Scott Sumner

"Back in the 1980s and 1990s, I did some research with Steve Silver on sticky wages and the business cycle. Using postwar data, it's very difficult to draw any conclusion, as the economy was hit by both supply and demand shocks, which have very different impacts on real wages. During the interwar period, however, demand shocks are much easier to identify and the role of wages really stands out." (05/21/17)