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Relative wage concern: the missing piece in the contract multiplier?

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  • Ascari, Guido
  • Garcia, Juan A.

Abstract

We build a dynamic general equilibrium model with staggered wages that incorpo- rates relative wage concern on the part of workers. We then investigate the effects of money shocks on both inflation and output. In contrast to previous models of stag- gered wages/prices, both output and inflation persistence is a robust finding of the model. Persistence results hold for all the sensible parametrisations. Given the empir- ical evidence in favour of a relative wage concern, we conclude that this may be the missing piece in the money shocks persistence puzzle.

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Bibliographic Info

Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 58 (2004)
Issue (Month): 4 (December)
Pages: 343-369

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Handle: RePEc:eee:reecon:v:58:y:2004:i:4:p:343-369

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Web page: http://www.elsevier.com/locate/inca/622941

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Cited by:
  1. Ascari, Guido & Garcia, Juan A., 2004. "Relative wage concern: the missing piece in the contract multiplier?," Research in Economics, Elsevier, vol. 58(4), pages 343-369, December.
  2. Caleiro, António, 2009. "How upside down are political business cycles when there is output persistence," Research in Economics, Elsevier, vol. 63(1), pages 22-26, March.

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