Rule of Thumb Consumers Meet Sticky Wages

Andrea Colciago

MPRA Paper from University Library of Munich, Germany

Abstract: It has been argued that rule of thumb consumers substantially alter the determinacy properties of simple interest rate rules and the dynamics of an otherwise standard New-keynesian model. In this paper we show that nominal wage stickiness helps re-establishing standard results. Key findings are that wage stickiness i) affects the shape of determinacy regions in the parameters space, restoring the relevance of the Taylor principle for the conduct of monetary policy; ii) implies that a rise in consumption in response to an innovation in government spending is not a robust feature of the model.

Keywords: Rule of Thumb Consumers; Sticky Wages; Determinacy; Fiscal Shocks (search for similar items in EconPapers)
JEL-codes: E21 E30 E4 (search for similar items in EconPapers)
Date: 2005-12-01, Revised 2007-04-27
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (9)

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https://mpra.ub.uni-muenchen.de/3275/1/MPRA_paper_3275.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/3756/1/MPRA_paper_3756.pdf revised version (application/pdf)

Related works:
Journal Article: Rule-of-Thumb Consumers Meet Sticky Wages (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3275

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