Staggered contracts and business cycle persistence
Staggered price and staggered wage contracts are commonly viewed as similar mechanisms in generating persistent real effects of monetary shocks. In this paper, we distinguish the two mechanisms in a general equilibrium framework. We show that, although the dynamic price setting and the dynamic wage setting equations are alike, a key parameter governing persistence is linked to the underlying preferences and technologies in different ways. Under the staggered wage mechanism, an intertemporal smoothing incentive in labor supply creates a real rigidity that is absent under the staggered price mechanism. Consequently, the two have different implications on persistence. While the staggered price mechanism by itself is incapable of, the staggered wage mechanism has a great potential in generating persistence.
|Date of creation:||1998|
|Contact details of provider:|| Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291|
Phone: (612) 204-5000
Web page: http://minneapolisfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.minneapolisfed.org/pubs/ Email: |
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.:
- Olivier J. Blanchard, 1985.
"The Wage Price Spiral,"
400, Massachusetts Institute of Technology (MIT), Department of Economics.
- Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996.
"Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?,"
NBER Working Papers
5809, National Bureau of Economic Research, Inc.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Sticky price models of the business cycle: can the contract multiplier solve the persistence problem?," Staff Report 217, Federal Reserve Bank of Minneapolis.
- Evan F. Koenig, 1996. "Aggregate price adjustment: the Fischerian alternative," Working Papers 9615, Federal Reserve Bank of Dallas.
- Ben S. Bernanke & Kevin Carey, 1996. "Nominal Wage Stickiness and Aggregate Supply in the Great Depression," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 853-883.
- Paul R. Bergin & Robert C. Feenstra, "undated".
"Staggered Price Setting And Endogenous Persistence,"
Department of Economics
98-05, California Davis - Department of Economics.
- Paul R. Bergin & Robert C. Feenstra, 1998. "Staggered Price Setting and Endogenous Persistence," NBER Working Papers 6492, National Bureau of Economic Research, Inc.
- Robert Feenstra & Paul Bergin, 2004. "staggered price setting and endogenous persistence," Working Papers 985, University of California, Davis, Department of Economics.
- Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1997.
"Sticky price and limited participation models of money: A comparison,"
European Economic Review,
Elsevier, vol. 41(6), pages 1201-1249, June.
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1996. "Sticky price and limited participation models of money: a comparison," Working Paper Series, Macroeconomic Issues WP-96-28, Federal Reserve Bank of Chicago.
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1996. "Sticky price and limited participation models of money: a comparison," Staff Report 227, Federal Reserve Bank of Minneapolis.
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1996. "Sticky Price and Limited Participation Models of Money: A Comparison," NBER Working Papers 5804, National Bureau of Economic Research, Inc.
- Michael T. Kiley, 1997. "Staggered price setting and real rigidities," Finance and Economics Discussion Series 1997-46, Board of Governors of the Federal Reserve System (U.S.).
- Julio J. Rotemberg, 1994.
"Prices, Output and Hours: An Empirical Analysis Based on a Sticky Price Model,"
NBER Working Papers
4948, National Bureau of Economic Research, Inc.
- Rotemberg, Julio J., 1996. "Prices, output, and hours: An empirical analysis based on a sticky price model," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 505-533, June.
- Jang-Ok Cho & Thomas Cooley & Louis Phaneuf, 1994.
"The Welfare Costs of Nominal Wage Contracting,"
Cahiers de recherche CREFE / CREFE Working Papers
30, CREFE, Université du Québec à Montréal, revised 22 Jan 1996.
- Robert E. Lucas, Jr. & Michael Woodford, 1993. "Real Effects of Monetary Shocks in an Economy with Sequential Purchases," NBER Working Papers 4250, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Kevin Carey, 1996. "Nominal Wage Stickiness and Aggregate Supply in the Great Depression," NBER Working Papers 5439, National Bureau of Economic Research, Inc.
- Griffin, Peter, 1992. "The Impact of Affirmative Action on Labor Demand: A Test of Some Implications of the Le Chatelier Principle," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 251-260, May.
- Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
- repec:nbr:nberre:0126 is not listed on IDEAS
- 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.).
- Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
- Taylor, John B, 1980.
"Aggregate Dynamics and Staggered Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 88(1), pages 1-23, February.
When requesting a correction, please mention this item's handle: RePEc:fip:fedmem:127. 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: (Janelle Ruswick)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.