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Relative Wage Concern: the Missing Piece in the Contract Multiplier?

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  • G. Ascari
  • J. A. Garcia

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

Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 32.

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Length: 51 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:dnb:staffs:32

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Keywords: Staggered wages; output persistence; business cycles;

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References

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Cited by:
  1. G. Ascari & J. A. Garcia, 1999. "Relative Wage Concern: the Missing Piece in the Contract Multiplier?," DNB Staff Reports (discontinued), Netherlands Central Bank 32, Netherlands Central Bank.
  2. Caleiro, António, 2009. "How upside down are political business cycles when there is output persistence," Research in Economics, Elsevier, Elsevier, vol. 63(1), pages 22-26, March.

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