11. However, if the figures shown are nominal wages then real wages are not increasing at all. 12. Firms hire them because they see the inflation as allowing higher profits for given nominal wages . 13. In a model with nominal wage rigidities, changes in exchange rate implies changes in actual real wage. 14. Second, nominal wage cuts would be difficult to put into effect because of laws and wage contracts. 15. Nominal wages increased an average of 13 % per year while real wages rose 7 % each year.16. On numerous occasions in the 1990s real wages decreased since nominal wages could not keep up with inflation. 17. And since it is hard to cut nominal wage rates, price stability could put a floor beneath real wages. 18. Although nominal wages were rising, there was not a commensurate increase in the standard of living for the Chilean population. 19. If only nominal wages are considered, the conclusion has to be that people used to be significantly poorer than today. 20. The value of \ lambda ^ * thus determines how rapidly the nominal wage adjusts to its new steady-state value.
