Optimising Agents, Staggered Wages and Persistence in the Real Effects of Money Shocks

Guido Ascari ()

Economic Journal, 2000, vol. 110, issue 465, pages 664-86

Abstract: In this paper we incorporate Taylor's (1979) staggered wage setting into an optimising dynamic general equilibrium framework to study whether staggered wages could induce a high degree of persistence in the real effects of money shocks. We conclude that high persistence is an unlikely outcome. Sensible values of the microeconomic parameters and/or a moderate rate of underlying inflation imply a low degree of persistence. Furthermore, once explicit microfoundations are taken into account, we show that: (i) the model is highly non-linear; (ii) the inertia of the system is inversely related to the level of average inflation.

Date: 2000
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Working Paper: Optimizing Agents, Staggered Wages and Persistence in the Real Effects of Money Shocks (1997)
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