Staggered Wages and Output Dynamics under Disinflation

Guido Ascari and Neil Rankin

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We study the output costs of a reduction in monetary growth in a dynamic general equilibrium model with staggered wages. The money wage is fixed for two periods, and is chosen according to intertemporal optimization. Agents have labour market monopoly power. We show that the introduction of microfoundations helps to resolve the puzzle raised by directly postulated models, namely that disinflation in staggered pricing models causes a boom. In our model disinflation, whether unanticipated or anticipated, unambiguously causes a slump.

Keywords: WAGES; INFLATION; MONEY (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2000
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https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp557.pdf

Related works:
Journal Article: Staggered wages and output dynamics under disinflation (2002)
Working Paper: Staggered Wages and Output Dynamics under Disinflation (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:557

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