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dc.contributor.authorPaustian, Matthiasen
dc.date.accessioned2009-01-29T15:10:47Z-
dc.date.available2009-01-29T15:10:47Z-
dc.date.issued2004-
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
dc.language.isoengen
dc.publisher|aUniversity of Bonn, Bonn Graduate School of Economics (BGSE) |cBonnen
dc.relation.ispartofseries|aBonn Econ Discussion Papers |x18/2004en
dc.subject.jelE32en
dc.subject.jelE52en
dc.subject.ddc330en
dc.subject.keywordwelfareen
dc.subject.keywordCalvoen
dc.subject.keywordTayloren
dc.subject.keywordsticky informationen
dc.subject.keywordcosts of nominal rigiditiesen
dc.titleCan Wage and Price Stickiness Account for Sizeable Costs of Business Cycle Fluctuations?-
dc.typeWorking Paperen
dc.identifier.ppn473005662en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:bonedp:182004-

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