Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-28T07:23:18.806Z Has data issue: false hasContentIssue false
  • English
  • Français

Nominal inertia in a competitive model with an incomplete capital market

Published online by Cambridge University Press:  17 August 2016

Torben M. Andersen  and
Michael Christensen
Torben M. Andersen
Affiliation:
University of Aarhus, Denmark
Michael Christensen
Affiliation:
The Aarhus School of Business, Denmark
Get access

Summary

In an intertemporal model with competitive labour and product markets it is shown how nominal inertia with asymmetrical adjustment of nominal wages and prices may arise even though there are no informational asymmetries between the labour and the product markets. As a consequence, nominal shocks can have real effects. Nominal inertia is in the present setting generated by the interplay between incomplete capital markets and an inability of agents to disentangle temporary from permanent shocks.

Résumé

Résumé

Dans un modèle intertemporel avec des marchés du travail et des biens concurrentiels, il est montré comment une inertie nominale avec un ajustement asymétrique des prix et des salaires nominaux peut survenir même s’il n’y a aucune asymétrie d’information entre le marché du travail et des biens de consommation. En conséquence, les chocs nominaux peuvent avoir des effets réels. L’inertie nominale est, dans le cadre spécifié ci-dessus, généré par l’interaction entre les marchés de capitaux imparfaits et l’incapacité des agents à distinguer les chocs temporaires des chocs permanents.

Keywords

E32E52E32E52
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 62 , Issue 3-4 , 1996 , pp. 239 - 253
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1996 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

(*)

Comments and suggestions from Per B. Overgaard, Bo Sandemann Rasmussen, Ole Risager and two anonymous referees are gratefully acknowledged. The paper is written as part of the HCM-project “Imperfect Competition in Intertemporal General Equilibrium Macro-Models”.

References

Abraham, K.G. and Haltiwanger, J.C. [1995], Real wages and the busines cycle, Journal of Economic Literature, 33(3), pp. 1215–1264.Google Scholar
Aitchison, J. and Brown, J.A.C. [1957], The Log-normal Distribution, New York, Cambridge University Press.Google Scholar
Aizenman, J. [1989], Monopolistic competition, relative prices, and output adjustment in the open economy, Journal of International Money and Finance, 8(1), pp. 5–28.Google Scholar
Alogoskoufis, G.S. [1983], The labour market in an equilibrium business cycle model, Journal of Monetary Economics, 11(1), pp. 117–128.Google Scholar
Andersen, T.M. [1994], Price Rigidity – Causes and Macrocconomic Implications, Oxforf, Clarendon Press.Google Scholar
Andersen, T.M. [1996a], Nominal price and wage adjustment to foreign price changes, to appear in Journal of Macroeconomics.Google Scholar
Andersen, T.M. [1996b], Incomplete capital markets, wage formation and stabilization policy, Working Paper, University of Aarhus.Google Scholar
Andersen, T.M. and Christensen, M. [1989], Relative wages and employment fluctuations, Journal of Macroeconomics, 11(4), pp. 477–492.Google Scholar
Blanchard, O.J. [1986], The eage-price spiral, Quarterly Journal of Economics, 101(3), pp. 543–565.Google Scholar
Cooper, R. and John, A. [1988], Coordinating coordination failures in Keynesian models, Quarterly Journal of Economics, 103(3), pp. 441–463.Google Scholar
Cukierman, A. [1984], Inflation, Stagflation, Relative Prices and Imperfect Information, Cambridge, Cambridge University Press.Google Scholar
Graybill, F.A. [1961], An Introduction to Linear Statistical Models, Vol. 1, New York, McGraw-Hill.Google Scholar
Lucas, R.E. Jr. [1975], An equilibrium model of the business cycle, Journal of Political Economy, 83(6), pp. 1113–1144.Google Scholar
Marini, G. [1985], Intertemporal substitution and the role of monetary policy, Economic Journal, 95(2), pp. 87–100.Google Scholar
Marini, G. [1986] Employment fluctuations and demand management, Economica, 53(2), pp. 209–218.Google Scholar
Muth, J.F. [1960] Optimal properties of exponentially weighted forecast, Journal of American Statistical Association, 55(2), pp. 299–306.Google Scholar