Kiel Working Papers, Kiel Institute for World Economics
No 1257:
Monetary Persistence, Imperfect Competition, and Staggering Complementarities
Christian Merkl and Dennis J. Snower
Abstract: This paper explores the influence of wage and price
staggering on monetary persistence. First, our analysis indicates that the
degree of monetary persistence generated by wage vis-à-vis price staggering
depends on the relative competitiveness of the labor and product markets.
We show that the conventional wisdom that wage staggering can generate more
persistence than price staggering does not necessarily hold. Second, this
paper discusses weaknesses of the "contract multiplier," which is generally
used to compare persistence, and proposes the measure "quantitative
persistence." Third, we show that, for plausible parameter values, wage and
price staggering are highly complementary in generating monetary
persistence. Thus beyond understanding how they work in isolation, it is
important to explore their interactions.
Keywords: Monetary Persistence, Price Staggering, Wage Staggering, Monetary Policy; (follow links to similar papers)
JEL-Codes: E52,; E50,; E40; (follow links to similar papers)
39 pages, September 2005
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