Nominal Contracting and Monetary Targets - Drifting Into Indexation  

Oleh:

Minford, Patrick ; Nowell, Eric ; Webb, Bruce

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 113 no. 484 (2003), page 65-100.
Topik: INDEXATION; nominal contracting; monetary targets; drifting; indexation
Fulltext: 65.pdf (246.68KB)

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: EE28.9 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

We look for a theoretical justification of nominal wages contracts in household diversification of risk. In a calibrated general equilibrium model, the paper finds from stochastic stimulation that if both productivity and monetary shocks are temporary, then optimal wage contracts are overwhelmingly nominal. The model suggests that the persistence in monetary shocks not only raises wage protection but also reduces welfare in a world where productivity shocks are persistent, as both theory and empirical results for the OECD suggest they are. This suggests that this central bank practice is due for review.

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