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Some Evidence on Demand Fluctuations and the Increased Stability of the Post-war American Economy

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  • Magda Kandil

Abstract

This paper investigates the implications of a sticky-wage contracting model that can explain both the decline in wage and price flexibility and the increased stability of the postwar American economy. The reduction in the size of demand shocks in the postwar period has increased agents' incentives to write longer contracts. Though longer contracts have rendered real activity more responsive to demand shocks in the postwar period, the reduction in the size of these shocks has dominated the increase in the size of response to a particular shock. Overall, real activity has become more stable in the postwar period, as predicted by theory.

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  • Magda Kandil, 1992. "Some Evidence on Demand Fluctuations and the Increased Stability of the Post-war American Economy," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 839-864, November.
    • Handle: RePEc:cje:issued:v:25:y:1992:i:4:p:839-64
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    Cited by:

    1. Magda Kandil, 2002. "Asymmetry In Economic Fluctuations In The Us Economy: The Pre-War And The 1946-1991 Periods Compared," International Economic Journal, Taylor & Francis Journals, vol. 16(1), pages 21-42.

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