48 Pages Posted: 27 Sep 2001 Last revised: 18 Nov 2007
Date Written: August 2001
We present a model embodying moderate amounts of nominal rigidities which accounts for the observed inertia in inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after an expansionary shock to monetary policy. Of these features, the most important are staggered wage contracts of average duration three quarters, and variable capital utilization.
Keywords: consumption insurance, marriage
JEL Classification: D1, E21, E3, E4, E5, J12
Suggested Citation: Suggested Citation
Christiano, Lawrence J. and Eichenbaum, Martin and Evans, Charles L., Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy (August 2001). FRB of Chicago Working Paper No. 2001-08; FRB of Cleveland Working Paper No. 01-07. Available at SSRN: https://ssrn.com/abstract=284956 or http://dx.doi.org/10.2139/ssrn.284956