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In a number of influential recent papers, Taylor (1979a, b; 1980a, b) has analyzed the behaviour of an economy characterized by staggered over-lapping wage contracts and rational expectations. His model has the "Keynesian" feature that the second moment of the distribution function of real output...
Persistent link: https://www.econbiz.de/10013221541
, real output, and inflation. It summarizes microeconomic data on price and wage setting behavior, and argues that staggered …
Persistent link: https://www.econbiz.de/10013223321
try to prevent a cut in nominal wages. If inflation is so low that some nominal wages have to be cut, the strategic … advantage of the workers' induces higher unemployment in equilibrium. The upshot is a long run tradeoff between inflation and … unemployment for low levels of inflation. The prediction that low inflation involves higher unemployment in Europe but not in the …
Persistent link: https://www.econbiz.de/10013237923
results suggest that DNWR may not provide a strong argument against the targeting of low inflation rates, as practiced by many …
Persistent link: https://www.econbiz.de/10012778236
Most wage-contracting models with rational expectations fail to replicate the persistence in inflation observed in the … data. We argue that coordination problems and multiple equilibria are the keys to explaining inflation persistence. We … thus rational. Based on quarterly U.S. data over the period 1955-2000, we find evidence that inflation is more persistent …
Persistent link: https://www.econbiz.de/10013218081
inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after …
Persistent link: https://www.econbiz.de/10013223053
monetary policymaking. First, we discuss why trimmed means provide the best measure of core inflation. Second, we outline how … rigidities impede policymakers' ability to control inflation. And third, we describe how alternative shock/rigidity combinations … create inflation's grease (whereby it improves economic efficiency by speeding adjustment) and sand effects (whereby it …
Persistent link: https://www.econbiz.de/10013223871
-run Phillips curve which relates average output gap to average wage inflation: it is virtually vertical at high inflation and … flattens at low inflation. Macroeconomic volatility shifts the curve outward and reduces output. The results imply that … stabilization policies play an important role, and that optimal inflation may be positive and differ across countries with different …
Persistent link: https://www.econbiz.de/10013147601
If nominal wages are downward rigid, moderate levels of inflation may improve labor market efficiency by facilitating … higher-inflation environments. Using individual wage change data from two sources, we find that about 6-10 percent of workers … experience nominally rigid wages in a 10- percent inflation environment. This proportion rises to over 15 percent at a 5 percent …
Persistent link: https://www.econbiz.de/10013246501
relates average unemployment to average wage inflation; the curve is virtually vertical for high inflation rates but becomes … flatter as inflation declines. Second, macroeconomic volatility shifts the Phillips curve outward, implying that stabilization …, at low inflation. Fourth, when inflation decreases, volatility of unemployment increases whereas the volatility of …
Persistent link: https://www.econbiz.de/10012759324