Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97316
Authors: 
Tesfaselassie, Mewael
Year of Publication: 
2014
Series/Report no.: 
Kiel Working Paper 1923
Abstract: 
The paper studies the effects of credible disinflation in the presence of real wage rigidity, comparing the Calvo and Rotemberg price setting mechanisms (the two popular variants of the New-Keynesian model). In both types of models, a credible, gradual disinflation is shown to lead to a delayed slump in output along the transition path. The delayed-slump result is novel and owes to negative real wage growth along the transition path, whose effect is amplified by the degree of real wage rigidity.
Subjects: 
sticky prices
real wage rigidity
disinflation
nonlinear dynamics
JEL: 
E31
E50
Document Type: 
Working Paper

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