Persistency in Sticky Price Models

European Economic Review, Papers and Proceedings, 1998

Posted: 24 Apr 1998

See all articles by Torben M. Andersen

Torben M. Andersen

University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Abstract

Nominal rigidities imply that monetary neutrality is broken, but can they also account for persistent effects of nominal shocks? One possible propagation mechanism may arise from the fact that nominal price and wage decisions are not coordinated in a decentralized economy, but made by numerous agents acting in an uncoordinated way based on private information. Models with staggered price or wage setting captures neatly the basic implications of non-synchronised decision making. However, recent theoretical work has questioned whether staggering can account for quantitatively important propagation of shocks over time. This paper provides an introduction and overview of the recent literature, and it is concluded that staggering may be a quantitative important propagation mechanism.

Note: This is a description of the paper and is not the actual abstract.

JEL Classification: E32, E24, J31

Suggested Citation

Andersen, Torben M., Persistency in Sticky Price Models. European Economic Review, Papers and Proceedings, 1998, Available at SSRN: https://ssrn.com/abstract=42579

Torben M. Andersen (Contact Author)

University of Aarhus - Department of Economics ( email )

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