Monetary Persistence, Imperfect Competition and Staggering Complementarities

Dennis Snower and Christian Merkl

No 5658, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper explores the influence of wage and price staggering on monetary persistence. We show that, for plausible parameter values, wage and price staggering are highly complementary in generating monetary persistence. We do so by proposing the new measure "quantitative persistence," after discussing weaknesses of the "contract multiplier," which is generally used to compare persistence. The existence of complementarities means that beyond understanding how wage and price staggering work in isolation, it is important to explore their interactions. Furthermore, our analysis indicates that the degree of monetary persistence generated by wage vis-Ã -vis price staggering depends on the relative competitiveness of the labour and product markets. We show that the conventional wisdom that wage staggering can generate more persistence than price staggering does not necessarily hold.

Keywords: Monetary persistence; Price staggering; Wage staggering; Monetary policy (search for similar items in EconPapers)
JEL-codes: E40 E50 E52 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: MONETARY PERSISTENCE, IMPERFECT COMPETITION, AND STAGGERING COMPLEMENTARITIES (2009)
Working Paper: Monetary Persistence, Imperfect Competition, and Staggering Complementarities (2007)
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