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Money and Business Cycle with One-Period Nominal Contracts

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  • Jang-Ok Cho

Abstract

A modified version of the nominal contract developed by J. A. Gray (1976) and S. Fischer (1977) is introduced in a general equilibrium model with money which has been used in the real business-cycle literature. Money is introduced in the model through cash-in-advance constraint. Two kinds of contracts are examined, namely, a nominal wage contract and a nominal price contract. The nominal wage contract improves the fit of the model in many respects. The nominal price contract increases the output volatility enormously but it has some unrealistic features.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 26 (1993)
Issue (Month): 3 (August)
Pages: 638-59

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Handle: RePEc:cje:issued:v:26:y:1993:i:3:p:638-59

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Citations

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Cited by:
  1. Evan F. Koenig, 1995. "Optimal monetary policy in an economy with sticky nominal wages," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q II, pages 24-31.
  2. Kim, Jinill, 2000. "Constructing and estimating a realistic optimizing model of monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(2), pages 329-359, April.
  3. repec:hal:wpaper:halshs-00590433 is not listed on IDEAS
  4. Olivier Jeanne, 1997. "Generating Real Persistent Effects of Monetary Shocks: How Much Nominal Rigidity Do We Really Need?," NBER Working Papers 6258, National Bureau of Economic Research, Inc.
  5. Moon, Weh-Sol, 2011. "Business cycle with nominal contracts and search frictions," MPRA Paper 31716, University Library of Munich, Germany.
  6. Christopher A. Sims & Tao A. Zha, 1998. "Does monetary policy generate recessions?," Working Paper, Federal Reserve Bank of Atlanta 98-12, Federal Reserve Bank of Atlanta.
  7. Zuzana Janko, 2008. "Imperfect Competition, Nominal Wage Contracts and the Business Cycle," Working Papers 2008-16, Department of Economics, University of Calgary, revised 11 Jan 2008.
  8. Collard, Fabrice & Ertz, Guy, 1996. "Stochastic Nominal Wage Contacts in a Cash-in-Advance Model," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Jul 1997.
  9. Bruno Chiarini & Paolo Piselli, 2000. "Aggregate Fluctuations In A Unionized Labor Market," Working Papers, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy 2_2000, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  10. Boileau, Martin & Normandin, Michel, 2002. "Aggregate employment, real business cycles, and superior information," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(3), pages 495-520, April.
  11. Bo William Hansen & Lars Mayland Nielsen, . "Can Nominal Wage and Price Rigidities Be Equivalent Propagation Mechanisms? The Case of Open Economics," Economics Working Papers, School of Economics and Management, University of Aarhus 2002-4, School of Economics and Management, University of Aarhus.
  12. Evan F. Koenig, 1995. "Targeting nominal income: a closer look," Working Papers, Federal Reserve Bank of Dallas 9518, Federal Reserve Bank of Dallas.
  13. Carlos Borondo, 1994. "La rigidez nominal de los precios de la Nueva Economía Keynesiana: una panorámica," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 18(2), pages 245-288, May.
  14. Jean-Pascal Bénassy, 2006. "Dynamic models with non clearing markets," PSE Working Papers halshs-00590433, HAL.
  15. Jinill Kim, 1998. "Monetary policy in a stochastic equilibrium model with real and nominal rigidities," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-02, Board of Governors of the Federal Reserve System (U.S.).
  16. Zuzana Janko, 2008. "Nominal Wage Contracts, Labor Adjustment Costs and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 434-448, April.
  17. Bénassy, Jean-Pascal, 2002. "Conférence François-Albert Angers (2002)," L'Actualité Economique, Société Canadienne de Science Economique, Société Canadienne de Science Economique, vol. 78(4), pages 423-457, Décembre.
  18. Dale W. Henderson & Jinill Kim, 1998. "The choice of a monetary policy reaction function in a simple optimizing model," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 601, Board of Governors of the Federal Reserve System (U.S.).
  19. Andersen, Torben M., 1998. "Persistency in sticky price models," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 593-603, May.
  20. Moon, Weh-Sol, 2011. "The Business Cycle with Nominal Contracts and Search Frictions," MPRA Paper 57457, University Library of Munich, Germany, revised 21 Jul 2014.

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