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Contracts and Money

  • Jovanic, Boyan
  • Ueda, Masako

Why are contracts not fully indexed? In a setting in which fully indexed contracts are feasible, the authors find that, when price-level data are gathered with delay, these contracts are not renegotiation-proof. The contracts that replace them entail a lower level of welfare for the parties to that contract. They also imply that real variables respond to nominal shocks. Copyright 1997 by the University of Chicago.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 105 (1997)
Issue (Month): 4 (August)
Pages: 700-708

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Handle: RePEc:ucp:jpolec:v:105:y:1997:i:4:p:700-708
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  1. Keane, Michael P, 1993. "Nominal-Contracting Theories of Unemployment: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 83(4), pages 932-52, September.
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  16. 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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  18. Chevalier, Judith A & Scharfstein, David S, 1995. "Liquidity Constraints and the Cyclical Behavior of Markups," American Economic Review, American Economic Association, vol. 85(2), pages 390-96, May.
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  21. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
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