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Real wage rigidities and disinflation dynamics: Calvo vs. Rotemberg pricing

  • Ascari, Guido
  • Rossi, Lorenza

Calvo pricing implies output gains, while Rotemberg pricing implies output losses after a disinflation. Introducing real wage rigidities has opposite effects: it generates a long-lasting boom in output in Calvo, and a moderate output slump in Rotemberg.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 110 (2011)
Issue (Month): 2 (February)
Pages: 126-131

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Handle: RePEc:eee:ecolet:v:110:y:2011:i:2:p:126-131
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Lombardo, Giovanni & Vestin, David, 2007. "Welfare implications of Calvo vs. Rotemberg pricing assumptions," Working Paper Series 0770, European Central Bank.
  2. Olivier Blanchard & Jordi Galí, 2005. "Real wage rigidities and the new Keynesian model," Economics Working Papers 912, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005.
  3. Laurence Ball, 1990. "Credible Disinflation with Staggered Price Setting," NBER Working Papers 3555, National Bureau of Economic Research, Inc.
  4. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  5. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
  6. Stephanie Schmitt-Grohe & Martin Uribe, 2004. "Optimal Simple and Implementable Monetary and Fiscal Rules," NBER Working Papers 10253, National Bureau of Economic Research, Inc.
  7. Guido Ascari, 2004. "Staggered prices and trend inflation: some nuisances," Macroeconomics 0404029, EconWPA.
  8. Knell, Markus, 2010. "Nominal and real wage rigidities. In theory and in Europe," Working Paper Series 1180, European Central Bank.
  9. Timothy Cogley & Argia M. Sbordone, 2008. "Trend Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve," American Economic Review, American Economic Association, vol. 98(5), pages 2101-26, December.
  10. Benati, Luca, 2008. "Investigating inflation persistence across monetary regimes," Working Paper Series 0851, European Central Bank.
  11. Julio Rotemberg, 1987. "The New Keynesian Microfoundations," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 69-116 National Bureau of Economic Research, Inc.
  12. Guido Ascari & Christian Merkl, 2009. "Real Wage Rigidities and the Cost of Disinflations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 417-435, 03.
  13. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November.
  14. Nistico, Salvatore, 2007. "The welfare loss from unstable inflation," Economics Letters, Elsevier, vol. 96(1), pages 51-57, July.
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