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Staggered Contracts and Business Cycle Persistence

  • Huang, K.X.
  • Liu, Z.

Staggered price and Staggered wage mechanisms are commonly viewed similar in generating persistent real effects of monetary shocks. In this paper, we distinguish these two mechanisms with individuals's optimizing behavior being explicitly taken into account. We show that, although the dynamic price and wage setting equations are alike, a key parameter governing persistence in these two equations is linked to the underlying preferences and technologies in very different ways.

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Paper provided by Minnesota - Center for Economic Research in its series Papers with number 305.

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Length: 38 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:minner:305
Phone: (612)625-6353
Fax: (612)624-0209
Web page:

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  1. 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.
  2. 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.
  3. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  4. Evan F. Koenig, 1996. "Aggregate price adjustment: the Fischerian alternative," Working Papers 9615, Federal Reserve Bank of Dallas.
  5. 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.
  6. Bernanke, Ben S & Carey, Kevin, 1996. "Nominal Wage Stickiness and Aggregate Supply in the Great Depression," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 853-83, August.
  7. 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.
  8. 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.
  9. Olivier J. Blanchard, 1985. "The Wage Price Spiral," Working papers 400, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. 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.).
  11. Paul R. Bergin & Robert C. Feenstra, 1998. "Staggered Price Setting and Endogenous Persistence," NBER Working Papers 6492, National Bureau of Economic Research, Inc.
  12. repec:nbr:nberre:0126 is not listed on IDEAS
  13. 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 251-60, May.
  14. 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.
  15. 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.).
  16. 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.
  17. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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