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| Author: | Rankin, N. |
| Title: | Nominal rigidity and monetary uncertainty |
| Journal: | European Economic Review
1998 : JAN, VOL. 42:1, p. 185-199 |
| Index terms: | MONETARY ECONOMICS OUTPUT INTEREST RATES |
| Language: | eng |
| Abstract: | A stochastic macro level model is used to examine the effect on current macroeconomic variables of an anticipated increase in variability of the money stock. There is nominal rigidity in the form of a money wage set one period in advance. It is shown that for plausible parameterisations, monetary uncertainty combined with nominal rigidity raises the nominal interest rate, depressing aggregate demand and hence current price and output. It also causes the wage to be set higher, increasing the 'natural' rate of unemployment . |
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