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The "Patman Effect" and Stabilization Policy

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  • Robert A. Driskill
  • Steven M. Sheffrin

Abstract

This paper examines the controversial link between interest rates and prices by introducing interest costs into John Taylor's model of overlapping wage contracts. We find that the presence of interest costs does affect the stabilization process and can make the tradeoffs between output and price variability less favorable.

Suggested Citation

  • Robert A. Driskill & Steven M. Sheffrin, 1985. "The "Patman Effect" and Stabilization Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 149-163.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:1:p:149-163.
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    File URL: http://hdl.handle.net/10.2307/1885739
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    Cited by:

    1. Myatt, Anthony & Scarth, William M., 1995. "Can fiscal spending be contractionary when interest rates have supply-side effects?," Journal of Macroeconomics, Elsevier, vol. 17(2), pages 289-301.
    2. Anthony E. Myatt & Gregory Young, 1986. "Interest Rates and Inflation: Uncertainty Cushions, Threshold and "Patman" Effects," Eastern Economic Journal, Eastern Economic Association, vol. 12(2), pages 103-114, Apr-Jun.

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