Generating Real Persistent Effects of Monetary Shocks: How Much Nominal Rigidity Do We Really Need?

Olivier Jeanne

No 6258, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper attempts to assess whether money can generate persistent economic" fluctuations in dynamic general equilibrium models of the business cycle. We show that a small" nominal friction in the goods market can make the response of output to monetary shocks large" and persistent if it is amplified by real wage rigidity in the labor market. We also argue that" given the level of real wage rigidity that is observed in developed countries nominal stickiness might be sufficient for money to produce economic fluctuations as persistent" as those observed in the data.

JEL-codes: E1 E3 (search for similar items in EconPapers)
Date: 1997-11
Note: ME
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Citations: View citations in EconPapers (15)

Published as European Economic Review, Vol. 42, no. 6 (June 1998): 1009-1032.

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Journal Article: Generating real persistent effects of monetary shocks: How much nominal rigidity do we really need? (1998)
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