Persistency in Sticky Price Models

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Persistency in Sticky Price Models

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Torben M. Andersen () (Department of Economics, University of Aarhus, Denmark)

Abstract

Nominal rigidities imply that nominal shock have an impact effect which may be propagated by standard mechanisms. However, the nominal adjustment process may in itself be a propagation mechanism causing persistent effects of nominal shocks. This may be caused by inertia in nominal wage and price adjustment arising due to input-output networks or multiperiod nominal contracting as captured in models with staggered price/wage decisions. It has recently been contested whether staggering can account for persistency of any quantitative importance. This paper reviews the theory and empirical evidence on this issue and it is concluded that staggering may be a quantitative important propagation mechanism.

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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 1997-19.

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Handle: RePEc:aah:aarhec:1997-19

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Torben M. Andersen, . "Staggered Wage-Setting and Output Persistence," Economics Working Papers 1998-14, School of Economics and Management, University of Aarhus. [Downloadable!]

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