TY - JOUR
T1 - Inflationary inertia in a wage-price spiral model
AU - Zeira, Joseph
PY - 1989/10
Y1 - 1989/10
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=45249128155&partnerID=8YFLogxK
U2 - 10.1016/0014-2921(89)90085-8
DO - 10.1016/0014-2921(89)90085-8
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AN - SCOPUS:45249128155
SN - 0014-2921
VL - 33
SP - 1665
EP - 1683
JO - European Economic Review
JF - European Economic Review
IS - 8
ER -