Nominal rigidity and monetary uncertainty
A dynamic, stochastic optimizing macromodel with predetermined money wages and labour market monopoly power is used to examine the effect on current macroeconomic variables of a temporary increase in variability of the future money supply. As a benchmark, we show that under perfect wage-price flexibility `uncertainty irrelevance' holds, when monetary uncertainty is appropriately defined. The introduction of wage stickiness causes future monetary uncertainty to raise the nominal interest rate, with a deflationary impact on current price and output, for plausible parameterizations. It also causes the money wage to be set higher, increasing the `natural' rate of unemployment.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rankin, N., 1993.
"Monetary Uncertainty in Discrete-Time Utility-of-Money Models,"
The Warwick Economics Research Paper Series (TWERPS)
408, University of Warwick, Department of Economics.
- Rankin, Neil, 1994. "Monetary uncertainty in discrete-time utility-of-money models," Economics Letters, Elsevier, vol. 44(1-2), pages 127-132.
- Stulz, ReneM., 1986. "Interest rates and monetary policy uncertainty," Journal of Monetary Economics, Elsevier, vol. 17(3), pages 331-347, May.
- Grinols, E.L. & Turnovsky, S.J., 1992.
"Risk, the Financial Market and Macroeconomic Equilibrium,"
Discussion Papers in Economics at the University of Washington
92-01, Department of Economics at the University of Washington.
- Grinols, Earl L. & Turnovsky, Stephen J., 1993. "Risk, the financial market, and macroeconomic equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 1-36.
- Grinols, E.L. & Turnovsky, S.J., 1992. "Risk, the Financial Market and Macroeconomic Equilibrium," Working Papers 92-01, University of Washington, Department of Economics.
- Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 381-99.
- Sorensen, Jan Rose, 1992. " Uncertainty and Monetary Policy in a Wage Bargaining Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(3), pages 443-55.
- Alberto Giovannini, 1987. "Uncertainty and Liquidity," NBER Working Papers 2296, National Bureau of Economic Research, Inc.
- Dixon, Huw David & Rankin, Neil, 1992.
"Imperfect Competition and Macroeconomics: A Survey,"
CEPR Discussion Papers
636, C.E.P.R. Discussion Papers.
- Dixon, Huw David & Rankin, Neil, 1994. "Imperfect Competition and Macroeconomics: A Survey," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 171-99, April.
- Dixon, H. & Rankin, N., 1991. "Imperfect Competition and Macroeconomics: a Survey," The Warwick Economics Research Paper Series (TWERPS) 387, University of Warwick, Department of Economics.
- Benassy, Jean-Pascal, 1995.
"Money and wage contracts in an optimizing model of the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 35(2), pages 303-315, April.
- Bénassy, Jean-Pascal, 1993. "Money and wage contracts in an optimizing model of the business cycle," CEPREMAP Working Papers (Couverture Orange) 9325, CEPREMAP.
- Hairault, Jean-Olivier & Portier, Franck, 1993.
"Money, New-Keynesian macroeconomics and the business cycle,"
European Economic Review,
Elsevier, vol. 37(8), pages 1533-1568, December.
- Hairault, J.O. & Portier, F., 1992. "Money New-Keynesian Macroeconomics and the Business Cycles," Papiers d'Economie MathÃ©matique et Applications 92.32, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
- Miles S. Kimball, 1989.
"Precautionary Saving in the Small and in the Large,"
NBER Working Papers
2848, National Bureau of Economic Research, Inc.
- Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
- Giovannini, Alberto, 1989. "Uncertainty and liquidity," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 239-258, March.
- Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, December.
- Katz, Eliakim & Rosenberg, Jacob, 1983. "Inflation Variability, Real-Wage Variability and Production Inefficiency," Economica, London School of Economics and Political Science, vol. 50(200), pages 469-75, November.
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
- Bianconi, Marcelo, 1992. "Monetary growth innovations in a simple cash-in-advance asset-pricing model," European Economic Review, Elsevier, vol. 36(8), pages 1501-1521, December.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1984.
"Money and Interest in Cash-In-Advance Economy,"
628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lars E. O. Svensson, 1986. "Sticky Goods Prices, Flexible Asset Prices, Monopolistic Competition, and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 385-405.
- Gertler, Mark & Grinols, Earl, 1982. "Monetary randomness and investment," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 239-258.
- Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
- Evans, George W, 1989. "The Conduct of Monetary Policy and the Natural Rate of Unemployment: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(4), pages 498-507, November.
- Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
- Driffill, John & Mizon, Grayham E. & Ulph, Alistair, 1990.
"Costs of inflation,"
Handbook of Monetary Economics,
in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 19, pages 1013-1066
When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:42:y:1998:i:1:p:185-199. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.