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Real Wage Rigidities and Disinflation Dynamics: Calvo vs. Rotemberg Pricing

  • Guido Ascari

    ()

    (Department of Economics and Quantitative Methods, University of Pavia)

  • Lorenza Rossi

    ()

    (Department of Economics and Quantitative Methods, University of Pavia)

Calvo pricing implies output gains, while Rotemberg pricing implies output losses after a disinflation. Introducing real wage rigidities has opposite effects: it generates a long-lasting boom in output in Calvo, and a moderate output slump in Rotemberg.

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File URL: http://economia.unipv.it/docs/dipeco/quad/ps/RePEc/pav/wpaper/q116.pdf
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Paper provided by University of Pavia, Department of Economics and Quantitative Methods in its series Quaderni di Dipartimento with number 116.

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Length: 11 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:pav:wpaper:116
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  1. Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, 02.
  2. Knell, Markus, 2010. "Nominal and real wage rigidities. In theory and in Europe," Working Paper Series 1180, European Central Bank.
  3. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  4. Guido Ascari, 2004. "Staggered prices and trend inflation: some nuisances," Macroeconomics 0404029, EconWPA.
  5. Nistico, Salvatore, 2007. "The welfare loss from unstable inflation," Economics Letters, Elsevier, vol. 96(1), pages 51-57, July.
  6. Ascari, Guido & Merkl, Christian, 2007. "Real Wage Rigidities and the Cost of Disinflations," IZA Discussion Papers 3049, Institute for the Study of Labor (IZA).
  7. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November.
  8. Julio Rotemberg, 1987. "The New Keynesian Microfoundations," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 69-116 National Bureau of Economic Research, Inc.
  9. Stephanie Schmitt-Grohe & Martin Uribe, 2004. "Optimal Simple and Implementable Monetary and Fiscal Rules," NBER Working Papers 10253, National Bureau of Economic Research, Inc.
  10. Luca Benati, 2008. "Investigating Inflation Persistence Across Monetary Regimes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(3), pages 1005-1060.
  11. Lombardo, Giovanni & Vestin, David, 2007. "Welfare implications of Calvo vs. Rotemberg pricing assumptions," Working Paper Series 0770, European Central Bank.
  12. Ball, Laurence, 1994. "Credible Disinflation with Staggered Price-Setting," American Economic Review, American Economic Association, vol. 84(1), pages 282-89, March.
  13. Timothy Cogley & Argia M. Sbordone, 2008. "Trend Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve," American Economic Review, American Economic Association, vol. 98(5), pages 2101-26, December.
  14. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
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