Author:
Andersen Torben M.,Christensen Michael
Abstract
SummaryIn an intertemporal model with competitive labour and product markets it is shown how nominal inertia with asymmetrical adjustment of nominal wages and prices may arise even though there are no informational asymmetries between the labour and the product markets. As a consequence, nominal shocks can have real effects. Nominal inertia is in the present setting generated by the interplay between incomplete capital markets and an inability of agents to disentangle temporary from permanent shocks.
Subject
General Economics, Econometrics and Finance