English, Article, Journal or magazine article edition: Stochastic Nominal Wage Contacts in a Cash-in-Advance Model Collard, Fabrice; Ertz, Guy

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Stochastic Nominal Wage Contacts in a Cash-in-Advance Model
Author
  • Collard, Fabrice
  • Ertz, Guy
Physical Description
  • preprint
Notes
  • We build a simple cash-in-advance model for the German economy, in which we introduce stochastic nominal wage contracts. This allows to weaken the negative effect of the inflation tax such that monetary shocks exert a positive effect on output dynamics. The nominal wage contract model is able to mimic the correlation of inflation and real balances with output. It also lowers the standard deviation of inflation relative to that of output. Further, the variance decomposition analysis indicates that in this setting, monetary shocks explain between 30% and 45% of output volatility in the first quarter. Moreover, it indicates that this model generates a long lasting effect of monetary shocks on output dynamics.
  • Business Cycle; Money; Persistence; Nominal Wage Contracts
  • RePEc:ctl:louvir:1997017
Language
  • English
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