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Output and Inflation Dynamics under Price and Wage Staggering Analytical Results

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  • Jean-Pascal Benassy

Abstract

In this paper we construct a dynamic stochastic general equilibrium model combining price and wage staggered contracts. A closed form solution is given for the optimal contracts and for the resulting macroeconomic dynamics, for any average length of price or wage contracts. We then investigate whether output and inflation can have a persistent and hump shaped response to monetary shocks under reasonable values for contract durations. We find that they do.

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  • Jean-Pascal Benassy, 2003. "Output and Inflation Dynamics under Price and Wage Staggering Analytical Results," Annals of Economics and Statistics, GENES, issue 69, pages 1-30.
    • Handle: RePEc:adr:anecst:y:2003:i:69:p:1-30
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    File URL: http://www.jstor.org/stable/20076361
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    Cited by:

    1. Trabandt, Mathias, 2003. "Sticky Information vs. Sticky Prices : A Horse Race in a DSGE Framework," SFB 373 Discussion Papers 2003,41, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.

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