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Predetermined Wages and Prices and the Impact of Expansionary Government Policy

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  • Cooper, Russell
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    Abstract

    This paper characterizes the monetary equilibria of an economy with commodity and labor contracts. If government policy is not "too variable," there may exist an equilibrium with predetermined wages and prices. In this equilibrium, observed changes in the money supply to finance government purchases have persistent real effects. The paper also provides theoretical support for an inverse relationship between the degree of indexation in contracts and the persistence of policy effects. Copyright 1990 by The Review of Economic Studies Limited.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Review of Economic Studies.

    Volume (Year): 57 (1990)
    Issue (Month): 2 (April)
    Pages: 205-14

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    Handle: RePEc:bla:restud:v:57:y:1990:i:2:p:205-14

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527

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    Cited by:
    1. Matthias Doepke & Martin Schneider, 2013. "Money as a Unit of Account," NBER Working Papers 19537, National Bureau of Economic Research, Inc.
    2. Antoine Martin & Cyril Monnet, 2000. "When should labor contracts be nominal?," Working Papers 603, Federal Reserve Bank of Minneapolis.
    3. Bernanke, Ben S, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 1-28, February.
    4. Ben S. Bernanke & Kevin Carey, 1996. "Nominal Wage Stickiness and Aggregate Supply in the Great Depression," NBER Working Papers 5439, National Bureau of Economic Research, Inc.
    5. Kevin X.D. Huang & Jonathan Willis, 2012. "Sectoral Interactions and Monetary Policy Under Costly Price Adjustments," 2012 Meeting Papers 883, Society for Economic Dynamics.

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