Is Increased Price Flexibility Stabilizing?
J. Bradford De Long and
Lawrence Summers
Authors registered in the RePEc Author Service: James Bradford DeLong ()
No 1686, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper uses Taylor's model of overlapping contracts to show that increased wage and price flexibility can easily be destabilizing. This result arises because of the Mundell effect. While lower prices increase output, the expectation of falling prices decreases output. Simulations based on realistic parameter values suggest that increases in price flexibility might bell increase the cyclical variability of output in the United States.
Date: 1985-08
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Published as DeLong, T. Bradford and Lawrence H. Summers. "Is Increased Price Flexibility Stabilizing?" American Economic Review, Vol. 76, No. 5, (December 1986),pp. 1031-1044.
Downloads: (external link)
http://www.nber.org/papers/w1686.pdf (application/pdf)
Related works:
Journal Article: Is Increased Price Flexibility Stabilizing? (1986) 
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:nbr:nberwo:1686
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1686
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().