Monetary shocks with variable effort
In a model with rigid nominal wages, full information and competitive product markets, I show that when an effort augmented production function is incorporated into an analysis of supply and demand shocks, the outcomes are in line with traditional Keynesian analysis for a wide range of parameter values. Monetary shocks can increase output and employment.
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- Bernanke, Ben S & Parkinson, Martin L, 1991.
"Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries,"
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- Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
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