This paper is a sequel to Working Paper No. 3131, "Hypotheses of Sticky Wages and Prices". My first objective is to re-examine the historical record of prices and wages. What changes in their behavior are indicated by the data and how can they be explained? Next, the models that imply that price...

In the post-World War II period, wage and price levels reacted much less to business contractions than they did in earlier times. Inflation prevailed and its persistence increased. The contractions themselves became relatively short and mild. All these developments have some common roots in the...