Inflationary inertia in a wage-price spiral model

Joseph Zeira*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

This paper examines theoretical issues of inflationary inertia by use of a wage-price spiral model, in which wage and price decisions are staggered. It is shown that within such a framework inflation is inertial in the following sense: a monetary disinflation cannot immediately succeed and the rate of inflation declines gradually. It is also shown that from another aspect of inflationary inertia, which is the effect of cost shocks, inflation is less inertia! even in a wage-price spiral model: a temporary cost shock has no continuing effect on the rate of inflation. Only permanent changes in costs have an inertial effect and they raise the rate of inflation in consecutive periods as well.

Original languageEnglish
Pages (from-to)1665-1683
Number of pages19
JournalEuropean Economic Review
Volume33
Issue number8
DOIs
StatePublished - Oct 1989

Fingerprint

Dive into the research topics of 'Inflationary inertia in a wage-price spiral model'. Together they form a unique fingerprint.

Cite this