search query: @author Gottfries, N. / total: 7
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| Author: | Gottfries, N. Westermark, A. |
| Title: | Nominal wage contracts and the persistent effects of monetary policy |
| Journal: | European Economic Review
1998 : FEB, VOL. 42:2, p. 207-223 |
| Index terms: | LABOUR CONTRACTS PAY MONETARY POLICY COMPANIES UNEMPLOYMENT |
| Language: | eng |
| Abstract: | An efficiency wage model is considered. In the model, wages affect turnover and firms choose optimal labour contracts under uncertainty about demand and productivity. It is shown that there may be an equilibrium with nominal wage contracts where monetary shocks affect output. In addition, monetary shocks have persistent effects on output because the previous state of the labour market affects the re-employment probability of quitting workers. Persistence increases if workers have bargaining power. Equilibrium inflation increases with persistence but decreases with the natural rate of unemployment for given persistence. |
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