Moderate Nominal Rigidity as the Anchor of Stability

Ichiro Takahashi
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Ichiro Takahashi: Chuo University

Chapter Chapter 8 in An Artificial Wicksell—Keynes Macroeconomy, 2021, pp 123-129 from Springer

Abstract: Abstract This chapter further explores in depth the stabilizing role of a moderate degree of nominal rigidity by examining how the macroeconomic stability changes as prices or wages become excessively flexible or rigid. Four destabilizing cases are considered: excessive degree of wage/price flexibility (Sects. 8.1/8.2) and excessive wage/price rigidity (Sects. 8.3/8.4). The discussion on these cases clarifies why a moderate degree of rigidity is required for the stability of AWK economy, which may provide new insights into policy issues such as the macroeconomic impact of minimum wage regulation. Section 8.5 discusses the baseline case and summarizes main findings.

Date: 2021
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DOI: 10.1007/978-981-16-6839-5_8

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