A Near-Rational Model of the Business Cycle, with Wage and Price Inertia
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ID: 302256
1985
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Abstract
This paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects. The individual loss to agents with inertial price-wage behavior is second-order in terms of the parameter describing the shock, while the effect on real economic variables is first-order. Thus, significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses.
| Reference Key |
openalex_W2027059017
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|---|---|
| Authors | George A. Akerlof, Janet L. Yellen |
| Journal | the quarterly journal of economics |
| Year | 1985 |
| DOI |
10.1093/qje/100.supplement.823
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| URL | |
| Keywords | Keywords not found |
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