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Disinflationary boom in a price-wage spiral model

Olivier Musy and Jean-Christophe Pereau

Economic Modelling, 2010, vol. 27, issue 1, 152-158

Abstract: This paper analyses the impact of the disinflation policy timing on the sign and the magnitude of the sacrifice ratio in a modified price and wage staggered model of Blanchard (1986). When wages are updated every four quarters and prices every two quarters, we show that a "cold-turkey" disinflation is associated to an output boom when the policy is implemented during the last period of life of the wage contract and a recession in the other quarters.

Keywords: Disinflation; policy; Shock; timing; Sacrifice; ratio; Price; and; wage; staggered; contracts (search for similar items in EconPapers)
Date: 2010
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Related works:
Working Paper: Disinflationary boom in a price-wage spiral model (2010)
Working Paper: Disinflationary boom in a price-wage spiral model (2009) Downloads
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