Staggered Nominal Contracts: Taylor Vs. Calvo

This paper compares the Taylor type and the Calvo type staggering schemes in terms of their implications on the behavior of aggregate price and output following a monetary expansion. In the sticky nominal price case, it is shown that Calvo type staggering implies positive autocorrelations (i.e., monotone dampening) in price and output, while Taylor type staggering implies negative autocorrelations (i.e., oscillatory dampening). In the sticky nominal wage case, however, it is found that both types of staggering generate monotonically dampening responses of price and output. In other words, the qualitative implications of wage stickiness are robust to the choice of staggering schemes.