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Economic Thought Through The Prism Of New Keynesian Economics

Author

Listed:
  • KRUME NIKOLOSKI

    (GOCE DELCHEV UNIVERSITY - STIP, REPUBLIC OF MACEDONIA)

  • OGNEN ALEKSOSKI

    (GOCE DELCHEV UNIVERSITY - STIP, REPUBLIC OF MACEDONIA)

  • BORKA PETRUSHEVA

    (GOCE DELCHEV UNIVERSITY - STIP, REPUBLIC OF MACEDONIA)

Abstract

In this paper I study the relation between real wage rigidity and nominal price and wage rigidities. We formulate a generalized price-setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs. real rigidities. We also find that new contracts exhibit very low sensitivity to marginal cost, corresponding to a relatively high degree of real rigidity. For instance, in models focused on labour contracts, wages are regarded as an „insurance” provided by the employer to the workers, while in efficiency wage models, wages are determinants of labour productivity. Such models have the ability to account for unemployment, but they are not able to explain the failure of the classical dichotomy.

Suggested Citation

  • Krume Nikoloski & Ognen Aleksoski & Borka Petrusheva, 2015. "Economic Thought Through The Prism Of New Keynesian Economics," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 17-21, January.
    • Handle: RePEc:cbu:jrnlec:y:2015:v:1i:p:17-21
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    References listed on IDEAS

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    1. Monica Dobrescu, 2012. "The New Keynesian Approach to Business Cycle Theory: Nominal and Real Rigidities," International Journal of Economic Practices and Theories, Academy of Economic Studies - Bucharest, Romania, vol. 2(1), pages 13-22, January.
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    3. Mankiw, N. Gregory, 1992. "The reincarnation of Keynesian economics," European Economic Review, Elsevier, vol. 36(2-3), pages 559-565, April.
    4. Brian Snowdon & Howard R. Vane, 2005. "Modern Macroeconomics," Books, Edward Elgar Publishing, number 3092.
    5. Blinder, Alan S., 2007. "Monetary policy by committee: Why and how?," European Journal of Political Economy, Elsevier, vol. 23(1), pages 106-123, March.
    6. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    7. Mankiw, N Gregory, 1989. "Real Business Cycles: A New Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 79-90, Summer.
    8. David Colander, 1992. "New Keynesian Economics in Perspective," Eastern Economic Journal, Eastern Economic Association, vol. 18(4), pages 438-448, Fall.
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    Cited by:

    1. Krume Nikoloski, 2016. "The New Classical Economy And Counter-Revolution Of The Monetarism," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 3, pages 206-211, June.

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