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Premium The Real Effects of Credible Disinflation in the Presence of Real Wage Rigidities
Author(s)
Tesfaselassie Mewael F.
Publication year2019
Publication title
economica
Resource typeJournals
PublisherWiley-Blackwell
The paper re‐examines the real effects of credible disinflation in the presence of real wage rigidities and non‐linear dynamics. A credible, gradual disinflation is shown to lead to a delayed output slump along the transition path if real wage rigidities are sufficiently strong. This result is novel and holds across alternative models of nominal inertia—price staggering and price adjustment costs. In the special case of a cold‐turkey disinflation, price adjustment costs imply an immediate but short‐lived slump while price staggering implies a long‐lasting boom.
Subject(s)boom , classical mechanics , compressive strength , disinflation , economics , engineering , environmental engineering , inertia , inflation (cosmology) , keynesian economics , labour economics , monetary economics , monetary policy , physics , real wages , slump , theoretical physics , thermodynamics , wage
Language(s)English
SCImago Journal Rank1.532
H-Index65
eISSN1468-0335
pISSN0013-0427
DOI10.1111/ecca.12288

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