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How Monetary Policy Can Have Permanent Real Effects with Only Temporary Nominal Rigidity
Citation
McDonald, IM and Sibly, HA, How Monetary Policy Can Have Permanent Real Effects with Only Temporary Nominal Rigidity, Scottish Journal of Political Economy, 48, (5) pp. 532-546. ISSN 0036-9292 (2001) [Refereed Article]
DOI: doi:10.1111/1467-9485.00213
Abstract
A macroeconomic model is developed in which the psychological concept of loss aversion is incorporated into workers' preferences. The impact of monetary, policy in the presence of loss aversion depends on the specification of the reference wage. The plausible specification that a worker's reference wage is the real wage she was paid in the previous period is considered in detail. Specifying the reference wage in this way, we show that an unanticipated change in monetary policy has a permanent, real effect when short term labour contracts are written in nominal wages.
Item Details
| Item Type: | Refereed Article |
|---|---|
| Research Division: | Economics |
| Research Group: | Economic Theory |
| Research Field: | Macroeconomic Theory |
| Objective Division: | Economic Framework |
| Objective Group: | Macroeconomics |
| Objective Field: | Monetary Policy |
| UTAS Author: | Sibly, HA (Dr Hugh Sibly) |
| ID Code: | 22938 |
| Year Published: | 2001 |
| Web of Science® Times Cited: | 5 |
| Deposited By: | Economics and Finance |
| Deposited On: | 2001-08-01 |
| Last Modified: | 2002-05-09 |
| Downloads: | 0 |
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