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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 J. Blanchard & Jordi Galí, 2005. "Real wage rigidities and the New Keynesian model," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  2. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  3. Guido Ascari, 2004. "Staggered prices and trend inflation: some nuisances," Macroeconomics 0404029, EconWPA.
  4. 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.
  5. Laurence Ball, 1990. "Credible Disinflation with Staggered Price Setting," NBER Working Papers 3555, National Bureau of Economic Research, Inc.
  6. Knell, Markus, 2010. "Nominal and real wage rigidities. In theory and in Europe," Working Paper Series 1180, European Central Bank.
  7. 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.
  8. Guido Ascari & Christian Merkl, 2009. "Real Wage Rigidities and the Cost of Disinflations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 417-435, 03.
  9. Lombardo, Giovanni & Vestin, David, 2008. "Welfare implications of Calvo vs. Rotemberg-pricing assumptions," Economics Letters, Elsevier, vol. 100(2), pages 275-279, August.
  10. Schmitt-Grohe, Stephanie & Uribe, Martin, 2007. "Optimal simple and implementable monetary and fiscal rules," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1702-1725, September.
  11. Luca Benati, 2008. "Investigating Inflation Persistence Across Monetary Regimes," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 1005-1060, August.
  12. Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 517-31, October.
  13. Nistico, Salvatore, 2007. "The welfare loss from unstable inflation," Economics Letters, Elsevier, vol. 96(1), pages 51-57, July.
  14. 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.
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