Stock-Returns and Inflation in a Principal-Agent Economy
Boyan Jovanovic () and
Working Papers from C.V. Starr Center for Applied Economics, New York University
We study a monetary in which final goods sell on spot markets, while labor and dividends sell through contracts. Firms and workers confuse absolute and relative price changes: A positive price-level shock makes sellers think they are producing better goods than they really are. They split this apparent windfall with workers who get a higher real wage. Hence, unexpected inflation shifts real income from firms (the principals) to workers (the agents) and thereby lowers stock-returns.
Keywords: MONEY SUPPLY; PRICES; STOCKS (search for similar items in EconPapers)
JEL-codes: E43 E51 (search for similar items in EconPapers)
Pages: 26 pages
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Journal Article: Stock-Returns and Inflation in a Principal-Agent Economy (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:cvs:starer:98-15
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