Journal article
Labor contracts, informational discrepancies and the role of monetary policy
Journal of macroeconomics, Vol.1(1), pp.1-18
1979
DOI: 10.1016/0164-0704(79)90018-1
Abstract
This paper examines output stabilization and inflationary consequences of short-run monetary policy. The macroeconomic framework incorporates informational discrepancies between the monetary authority and economic agents who form long-term labor contracts. Economic agents are assumed to form rational expectations of the rate of inflation. One result of the analysis is that optimal monetary policy rules for stabilizing fluctuations in output and inflation are independent of the structure of the wage contracts and the degree of informational discrepancy. A second proposition shows that the monetary authority can actually make use of specific knowledge concerning the contract structure to reduce fluctuations in the rate of change in output. In particular, the monetary authority can reduce fluctuations in output below those occurring in a frictionless system by increasing fluctuations in the rate of inflation.
Details
- Title: Subtitle
- Labor contracts, informational discrepancies and the role of monetary policy
- Creators
- Gary C. Fethke - University of IowaAndrew J. Policano - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Journal of macroeconomics, Vol.1(1), pp.1-18
- DOI
- 10.1016/0164-0704(79)90018-1
- ISSN
- 0164-0704
- eISSN
- 1873-152X
- Publisher
- Elsevier Inc
- Number of pages
- 18
- Language
- English
- Date published
- 1979
- Academic Unit
- Business Analytics
- Record Identifier
- 9984962549102771
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