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Hyperbolic Discounting and the Phillips Curve

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  • Liam Graham
  • Dennis J. Snower

Abstract

Using a standard dynamic general equilibrium model, we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long-run effects on real variables.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1346.

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Length: 29 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:kie:kieliw:1346

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Related research

Keywords: inflation; unemployment; Phillips curve; nominal inertia; monetary policy; dynamic general equilibrium;

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  1. Benabou, R. & Konieczny, J.D., 1991. "On Inflation and Output with CostlyPrice Changes: A Simple Unifying Result," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 586, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. repec:cup:macdyn:v:2:y:1998:i:3:p:383-400 is not listed on IDEAS
  3. Guido Ascari, 2004. "Staggered Prices and Trend Inflation: Some Nuisances," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 642-667, July.
  4. Ball, Laurence, 1988. "Is Equilibrium Indexation Efficient?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(2), pages 299-311, May.
  5. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  6. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262022834, December.
  7. Hasan Bakhshi & Pablo Burriel-Llombart & Hashmat Khan & Barbara Rudolf, 2003. "Endogenous price stickiness, trend inflation, and the New Keynesian Phillips curve," Bank of England working papers, Bank of England 191, Bank of England.
  8. Bénabou, Roland & Tirole, Jean, 2002. "Willpower and Personal Rules," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3143, C.E.P.R. Discussion Papers.
  9. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 1-19, May.
  10. Bullard, James & Keating, John W., 1995. "The long-run relationship between inflation and output in postwar economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(3), pages 477-496, December.
  11. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  12. Ascari, G., 1997. "Optimizing Agents, Staggered Wages and Persistence in the Real Effects of Money Shocks," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 486, University of Warwick, Department of Economics.
  13. Ascari, Guido, 1998. "Superneutrality Of Money In Staggered Wage-Setting Models," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 2(03), pages 383-400, September.
  14. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  15. Ahmed, Shaghil & Rogers, John H., 2000. "Inflation and the great ratios: Long term evidence from the U.S," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(1), pages 3-35, February.
  16. Calmfors, Lars & Johansson, Åsa, 2002. "Nominal Wage Flexibility, Wage Indexation and Monetary Union," Seminar Papers, Stockholm University, Institute for International Economic Studies 716, Stockholm University, Institute for International Economic Studies.
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