IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Money, Nominal Contracts, and the Business Cycle: I. One-Period Contract Case

  • Jang-Ok Cho
Registered author(s):

    A modified version of the nominal contract developed by Gray (1976) and Fischer (1977) is introduced in a general equilibrium model with money which has been used in the real business cycle literature. Money is introduced in the model through cash-in-advance constraint. The contract studied is more efficient than that studied by Gray-Fischer in the sense that the processes involved in the calculation of the nominal contract are not from any other model but from the contract model itself. Two kinds of contract are examined, namely a nominal wage contact and a nominal price contract. A nominal wage contract improves the fit of the model in every respect. In other words, nominal wage contract resolves almost all controversies related to the real business cycle approach. The output volatility increases significantly and the correlation structure becomes much closer to the actual one. However, although a nominal price contract increases the output volatility enormously, it has some unrealistic features. The real and nominal wage rate have very high correlations with output, and a surprise in the technology shock has a negative effect on total hours, output, and real wage rate.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    File Function: First version 1990
    Download Restriction: no

    Paper provided by Queen's University, Department of Economics in its series Working Papers with number 790.

    in new window

    Date of creation: May 1990
    Date of revision:
    Handle: RePEc:qed:wpaper:790
    Contact details of provider: Postal: Kingston, Ontario, K7L 3N6
    Phone: (613) 533-2250
    Fax: (613) 533-6668
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:qed:wpaper:790. 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: (Mark Babcock)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.