Empirical Evidence on Nominal Wage and Price Flexibility
AbstractThis paper tests a necessary condition for the neutrality of money in a framework that imposes only weak restrictions on the money supply process. It extends B. Bernanke's (1986) work by weakening the set of just-identifying restrictions and by providing a statistical test of the overidentifying restrictions. Instead of specifying a structural model to identify primitive shocks, the author deduces the impact effects of structural money shocks under the neutrality hypothesis and then tests whether the system maintains neutrality as it propagates these impact effects. The tests reject neutrality for both the M1 and the monetary base. Copyright 1993, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Quarterly Journal of Economics.
Volume (Year): 108 (1993)
Issue (Month): 2 (May)
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Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- Cogley, T., 1989. "Empirical Evidence On Nominal Wage And Price Flexibility," Working Papers 89-15, University of Washington, Department of Economics.
- Cogley, T., 1989. "Empirical Evidence On Nominal Wage And Price Flexibility," Discussion Papers in Economics at the University of Washington 89-15, Department of Economics at the University of Washington.
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- Rapach, David E., 2001. "Macro shocks and real stock prices," Journal of Economics and Business, Elsevier, vol. 53(1), pages 5-26.
- Erica L. Groshen & Mark E. Schweitzer, 1996. "Macro- and microeconomic consequences of wage rigidity," Working Paper 9607, Federal Reserve Bank of Cleveland.
- Charles A. Fleischman, 1999. "The causes of business cycles and the cyclicality of real wages," Finance and Economics Discussion Series 1999-53, Board of Governors of the Federal Reserve System (U.S.).
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