Nominal rigidities and the dynamic effects of a shock to monetary policy

Lawrence J. Christiano*, Martin Eichenbaum, Charles L. Evans

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2100 Scopus citations

Abstract

We present a model embodying moderate amounts of nominal rigidities that accounts for the observed inertia in inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after an expansionary shock to monetary policy. Of these features, the most important are staggered wage contracts that have an average duration of three quarters and variable capital utilization.

Original languageEnglish (US)
Pages (from-to)1-45
Number of pages45
JournalJournal of Political Economy
Volume113
Issue number1
DOIs
StatePublished - Feb 1 2005

ASJC Scopus subject areas

  • Economics and Econometrics

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