UNSPECIFIED. (2002) Staggered wages and output dynamics under disinflation. JOURNAL OF ECONOMIC DYNAMICS & CONTROL, 26 (4). pp. 653-680. ISSN 0165-1889

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Abstract

We study the output costs of a reduction in monetary growth in a dynamic general equilibrium model with staggered wages. The money wage is fixed for two periods, and is chosen according to intertemporal optimisation. Agents have labour market monopoly power. We show that the introduction of microfoundations helps to resolve the puzzle raised by directly postulated models, namely that disinflation in staggered pricing models causes a boom. In our model disinflation, whether unanticipated or anticipated, unambiguously causes a slump. (C) 2002 Elsevier Science B.V. All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Journal or Publication Title:	JOURNAL OF ECONOMIC DYNAMICS & CONTROL
Publisher:	ELSEVIER SCIENCE BV
ISSN:	0165-1889
Date:	April 2002
Volume:	26
Number:	4
Number of Pages:	28
Page Range:	pp. 653-680
Publication Status:	Published
URI:	http://wrap.warwick.ac.uk/id/eprint/11509

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