This paper investigates the robustness of the dynamic properties of staggered-contracts models. The author first analyzes the persistence of several different types of shocks in a model with constant nominal wages over the life of the contracts. The dynamic pattern of the effects of some types...

A model in which nominal wages are set by contracts that have cost-of-living objectives is likely to be consistent with the evidence of a unit root in the real GNP process of many countries. Values of the autoregressive root in the GNP process are calculated numerically for many countries using...

The authors build a dynamic model of the business cycle with monopolistically competitive firms. With simple assumptions concerning firm entry and exit, the model can explain some stylized facts of the business cycle that standard real business cycle models cannot predict. They include the...

In both the canonical and many extended versions of the New Keynesian model, optimal monetary policy under commitment implies price-level stationarity as long as expectations are rational. We show that this is no longer the case if the central bank and private agents make decisions before...