Is Increased Price Flexibility Stabilizing?
AbstractThis paper uses John Taylor's model of overlapping contracts to show that increased wage and price flexibility can easily be destabilizing because of the Mundell effect. While lower prices increase output, the expectation of falling prices decreases output. Simulations based on realistic parameter values suggest that increases in price flexibility might well increase the cyclical variability of output in the United States. Copyright 1986 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 76 (1986)
Issue (Month): 5 (December)
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Taylor, John B, 1980.
"Aggregate Dynamics and Staggered Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 88(1), pages 1-23, February.
- Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Mainstream e teorie economiche critiche. Intervista ad Emiliano Brancaccio sul suo nuovo libro Anti-Blanchard
by keynesblog in Keynes Blog on 2012-07-09 08:42:16
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