Imperfect Competition, Nominal Wage Contracts and the Business Cycle
We introduce nominal wage contracts into a competitive and a noncompetitive labor market structure. We find these models to have similar business cycle properties, but we argue that the imperfectly competitive market structure is more appropriate for nominal wage contract analyzes. We introduce imperfect competition to the labor market by assuming that households have market power and consequently choose nominal wage contracts as part of their maximization problem, while in a competitive structure nominal wage contracts are introduced via an exogenous rule. The latter formulation lacks microeconomic foundation that makes the model inappropriate for the analysis of nominal wage contracts.
|Date of creation:||11 Jan 2008|
|Date of revision:||11 Jan 2008|
|Contact details of provider:|| Postal: 2500 University Drive N.W., Calgary, Alberta, T2N 1N4|
Phone: (403) 220-5857
Fax: (403) 282-5262
Web page: http://econ.ucalgary.ca/
More information through EDIRC
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.:
- Hansen, Gary D., 1985.
"Indivisible labor and the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 16(3), pages 309-327, November.
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
- Kevin X. D. Huang & Zheng Liu & Louis Phaneuf, 2000. "On the Transmission of Monetary Policy Shocks," Cahiers de recherche CREFE / CREFE Working Papers 112, CREFE, Université du Québec à Montréal, revised Sep 2001.
- 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.
- Jang-Ok Cho, 1993. "Money and Business Cycle with One-Period Nominal Contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 638-59, August.
- Christopher J. Erceg, 1997. "Nominal wage rigidities and the propagation of monetary disturbances," International Finance Discussion Papers 590, Board of Governors of the Federal Reserve System (U.S.).
- Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
When requesting a correction, please mention this item's handle: RePEc:clg:wpaper:2008-16. 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: (May Ives)
If references are entirely missing, you can add them using this form.