Journal article
Sticky Wages, Rational Expectations and the Time Paths of Output and Employment
Journal of economics, Vol.19(1), pp.7-15
04/01/1993
Abstract
The role of monetary policy is investigated in an economy of long-term wage contracts and rational expectations. The main emphasis concerns the nature of the monetary authority's loss function, where the authority is viewed as either seeking to stabilize fluctuations in real output or in stabilizing fluctuations in real output about the normal growth rate. We demonstrate that stabilizing fluctuations in real output implies greater fluctuation in the rate of inflation than does a policy of stabilizing fluctuations around the normal growth rate. Indeed, the monetary policy rule that stabilizes fluctuations around the normal growth rate of output will minimize fluctuations in the inflation rate.
Details
- Title: Subtitle
- Sticky Wages, Rational Expectations and the Time Paths of Output and Employment
- Creators
- Gary FethkeAndrew Policano
- Resource Type
- Journal article
- Publication Details
- Journal of economics, Vol.19(1), pp.7-15
- ISSN
- 0361-6576
- Number of pages
- 9
- Language
- English
- Date published
- 04/01/1993
- Academic Unit
- Business Analytics
- Record Identifier
- 9984963235502771
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