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Monetary shocks with variable effort

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  • Frank Walsh

Abstract

In a model with rigid nominal wages, full information and competitive product markets, I show that when an effort augmented production function is incorporated into an analysis of supply and demand shocks, the outcomes are in line with traditional Keynesian analysis for a wide range of parameter values. Monetary shocks can increase output and employment.

Suggested Citation

  • Frank Walsh, 2005. "Monetary shocks with variable effort," Open Access publications 10197/190, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:oapubs:10197/190
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    File URL: http://hdl.handle.net/10197/190
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    References listed on IDEAS

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    1. George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 823-838.
    2. Bernanke, Ben S & Parkinson, Martin L, 1991. "Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 439-459, June.
    3. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    4. Laurence Ball & David Romer, 1990. "Real Rigidities and the Non-Neutrality of Money," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 183-203.
    5. Faria, Joao Ricardo, 2000. "Supervision and effort in an intertemporal efficiency wage model: the role of the Solow condition," Economics Letters, Elsevier, vol. 67(1), pages 93-98, April.
    6. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    7. Waller, Christopher J., 1989. "Efficiency wages, wage indexation and macroeconomic stabilization," Economics Letters, Elsevier, vol. 30(2), pages 125-128, August.
    8. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    9. Ramaswamy, Ramana & Rowthorn, Robert E, 1991. "Efficiency Wages and Wage Dispersion," Economica, London School of Economics and Political Science, vol. 58(232), pages 501-514, November.
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    More about this item

    Keywords

    Sticky nominal wage; Efficiency wages; Efficiency wage theory; Labor market;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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