Nominal Rigidity and Monetary Uncertainty

Neil Rankin

No 890, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A dynamic, stochastic optimizing macromodel with predetermined money wages and labour market monopoly power is used to examine the effect on current macroeconomic variables of a temporary increase in variability of the future money supply. As a benchmark, we show that under perfect wage-price flexibility `uncertainty irrelevance' holds, when monetary uncertainty is appropriately defined. The introduction of wage stickiness causes future monetary uncertainty to raise the nominal interest rate, with a deflationary impact on current price and output, for plausible parameterizations. It also causes the money wage to be set higher, increasing the `natural' rate of unemployment.

Keywords: Interest Rates; Monetary Uncertainty; Nominal Rigidity; Output (search for similar items in EconPapers)
JEL-codes: E44 (search for similar items in EconPapers)
Date: 1994-02
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=890 (application/pdf)

Related works:
Journal Article: Nominal rigidity and monetary uncertainty (1998)
Working Paper: Nominal Rigidity and Monetary Uncertainty (1993)
Working Paper: NOMINAL RIGIDITY AND MONETARY UNCERTAINTY
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:890

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=890

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().