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dc.contributor.authorPaustian, Matthiasen_US
dc.date.accessioned2009-01-29T15:10:47Z-
dc.date.available2009-01-29T15:10:47Z-
dc.date.issued2004en_US
dc.identifier.urihttp://hdl.handle.net/10419/22895-
dc.description.abstractThis paper asks the following two questions: First, can a model with nominal rigidities in wage and price setting account for the average welfare costs of business cycle fluctuations identified in Gali, Gertler, and Lopez-Salido (2003)? Second, do we need to agree on a particular scheme for nominal rigidities to answer that question? We compute a quadratic approximation to agents expected lifetime utility and evaluate welfare for different modeling schemes of nominal rigidities that all have the same average duration of contracts. Calvo (1983) wage and price contracts can deliver sizeable welfare costs, but other contracts of the same average stickiness cannot. Calvo (1983) contracts can imply welfare costs that are up to 4 times higher than those implied by overlapping contracts in the spirit of Taylor (1980) or Wolman (1999). Furthermore, the sticky information framework of Mankiw and Reis (2002) may generate welfare costs that are even smaller. This paper calls for more research into the origins of wage and price stickiness.en_US
dc.language.isoengen_US
dc.publisheren_US
dc.relation.ispartofseriesBonn econ discussion papers 2004,18en_US
dc.subject.jelE32en_US
dc.subject.jelE52en_US
dc.subject.ddc330en_US
dc.subject.keywordwelfareen_US
dc.subject.keywordCalvoen_US
dc.subject.keywordTayloren_US
dc.subject.keywordsticky informationen_US
dc.subject.keywordcosts of nominal rigiditiesen_US
dc.titleCan Wage and Price Stickiness Account for Sizeable Costs of Business Cycle Fluctuations?en_US
dc.typeWorking Paperen_US
dc.identifier.ppn473005662en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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