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Monetary Persistence, Imperfect Competition and Staggering Complementarities

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  • Merkl, Christian
  • Snower, Dennis J.

Abstract

This paper explores the influence of wage and price staggering on monetary persistence. We show that, for plausible parameter values, wage and price staggering are highly complementary in generating monetary persistence. We do so by proposing the new measure "quantitative persistence," after discussing weaknesses of the "contract multiplier," which is generally used to compare persistence. The existence of complementarities means that beyond understanding how wage and price staggering work in isolation, it is important to explore their interactions. Furthermore, our analysis indicates that the degree of monetary persistence generated by wage vis-à-vis price staggering depends on the relative competitiveness of the labour and product markets. We show that the conventional wisdom that wage staggering can generate more persistence than price staggering does not necessarily hold.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5658.

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Date of creation: May 2006
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Handle: RePEc:cpr:ceprdp:5658

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Keywords: monetary persistence; monetary policy; price staggering; wage staggering;

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Citations

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Cited by:
  1. Auray, Stephane & de Blas, Beatriz, 2011. "Investment, Matching and Persistence in a modified Cash-in-Advance Economy," Working Papers in Economic Theory 2011/10, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  2. Wohltmann, Hans-Werner & Winkler, Roland C., 2009. "Rational expectations models with anticipated shocks and optimal policy: a general solution method and a new Keynesian example," Economics Working Papers 2009,01, Christian-Albrechts-University of Kiel, Department of Economics.
  3. Marika Karanassou & Hector Sala & Dennis Snower, 2008. "Phillips Curves and Unemployment Dynamics: A Critique and a Holistic Perspective," Kiel Working Papers 1441, Kiel Institute for the World Economy.
  4. Merkl, Christian & Snower, Dennis, 2009. "Monetary Persistence, Imperfect Competition, And Staggering Complementarities," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 13(01), pages 81-106, February.
  5. Lechthaler, Wolfgang & Merkl, Christian & Snower, Dennis J., 2010. "Monetary Persistence and the Labor Market: A New Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7650, C.E.P.R. Discussion Papers.
  6. Marika Karanassou & Hector Sala & Dennis J. Snower, 2007. "The Evolution of Inflation and Unemployment: Explaining the Roaring Nineties," Working Papers, Queen Mary, University of London, School of Economics and Finance 604, Queen Mary, University of London, School of Economics and Finance.
  7. Hans-Werner Wohltmann & Roland Winkler, 2009. "On the Non-Optimality of Information: An Analysis of the Welfare Effects of Anticipated Shocks in the New Keynesian Model," Kiel Working Papers 1497, Kiel Institute for the World Economy.

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