Relative Wage Concern: the Missing Piece in the Contract Multiplier?

Guido Ascari () and J. A. Garcia

DNB Staff Reports (discontinued) from Netherlands Central Bank

Abstract: We build a dynamic general equilibrium model with staggered wages that incorpo- rates relative wage concern on the part of workers. We then investigate the effects of money shocks on both inflation and output. In contrast to previous models of stag- gered wages/prices, both output and inflation persistence is a robust finding of the model. Persistence results hold for all the sensible parametrisations. Given the empir- ical evidence in favour of a relative wage concern, we conclude that this may be the missing piece in the money shocks persistence puzzle.

Keywords: Staggered wages; output persistence; business cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 1999
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Related works:
Journal Article: Relative wage concern: the missing piece in the contract multiplier? (2004)
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