Nominal Contracts as Behaviour Towards Risk

We look for a theoretical justification of nominal wage contracts in household diversification of risk. We assume it is more costly for households than for firms to use financial markets for this purpose. In a calibrated general equilibrium model we find from stochastic simulation that where nominal shocks have comparable variability to real shocks optimal wage contracts are overwhelmingly nominal, in accordance with general OECD experience.

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Year of publication:	1997-08
Authors:	Minford, Patrick ; Nowell, Eric
Institutions:	C.E.P.R. Discussion Papers
Subject:	General Equilibrium \| Indexing Diversification \| Nominal Contracts \| Stochastic Simulation

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Extent:	application/pdf
Series:	CEPR Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Number 1666
Classification:	O20 - Development Planning and Policy. General ; O23 - Fiscal and Monetary Policy in Development
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005789213