Ascari, Guido and Rankin, Neil (2000) Staggered wages and output dynamics under disinflation. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers.

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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.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Deflation (Finance), Wages -- Effect of inflation on, Production standards, Equilibrium (Economics)
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	March 2000
Number:	No.557
Number of Pages:	38
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Fifth Framework Programme (European Commission) (FP5), Københavns universitet. Økonomiske institut (KU)
Grant number:	ERBFMBICT961073 (FFP)
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URI:	http://wrap.warwick.ac.uk/id/eprint/1620

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