IDEAS home Printed from https://ideas.repec.org/a/fip/fedcpr/y1993p585-611.html
   My bibliography  Save this article

Contracting costs, inflation, and relative price variability

Author

Listed:
  • Patricia Reagan
  • Rene M. Stulz

Abstract

This paper provides an analysis of the effect of relative price uncertainty and price level uncertainty on contracting costs. The paper shows that, as relative price uncertainty or price level uncertainty increase, contracts where performance is assured through the posting of a bond become more advantageous than contracts that rely on reputation. Increases in relative price and price level uncertainty make contracting more expensive by increasing the payoff from defaulting on long-term contracts when unfavorable realizations occur. As uncertainty increases, long-term contracting becomes less frequent and reputation plays a smaller role in contracting. Copyright 1993 by Ohio State University Press.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Patricia Reagan & Rene M. Stulz, 1993. "Contracting costs, inflation, and relative price variability," Proceedings, Federal Reserve Bank of Cleveland, pages 585-611.
    • Handle: RePEc:fip:fedcpr:y:1993:p:585-611
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. William L. Seyfried & Bradley T. Ewing, 2001. "Inflation Uncertainty and Unemployment: Some International Evidence," The American Economist, Sage Publications, vol. 45(2), pages 33-39, October.
    2. Ewing, Bradley T. & Seyfried, William L, 2003. "Modeling The Philips Curve: A Time-Varying Volatility Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 3(2).
    3. Ciżkowicz, Piotr & Rzońca, Andrzej, 2010. "Inflation and corporate investment in selected OECD countries in the years 1960-2005 – an empirical analysis," MPRA Paper 29846, University Library of Munich, Germany.
    4. Mariano Tommasi, 1996. "High inflation: resource misallocations and growth effects," Estudios de Economia, University of Chile, Department of Economics, vol. 23(2 Year 19), pages 157-177, December.
    5. William Seyfried & Bradley Ewing, 2004. "A time-varying volatility approach to modeling the phillips curve: A cross-country analysis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(2), pages 186-197, June.
    6. Christoph S. Weber, 2020. "The unemployment effect of central bank transparency," Empirical Economics, Springer, vol. 59(6), pages 2947-2975, December.
    7. Wang, Yizhong & Chen, Carl R. & Chen, Lifang & Huang, Ying Sophie, 2016. "Overinvestment, inflation uncertainty, and managerial overconfidence: Firm level analysis of Chinese corporations," The North American Journal of Economics and Finance, Elsevier, vol. 38(C), pages 54-69.
    8. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    9. Stanley Fischer, 1995. "Modern Approaches to Central Banking," NBER Working Papers 5064, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Inflation (Finance); Contracts;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedcpr:y:1993:p:585-611. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: 4D Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbclus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.