Abstract
Monetary business cycle (MBC) models are general equilibrium models designed to analyse how monetary shocks affect output, prices, and interest rates. This article describes the analytic framework underlying sticky prices and wages in modern MBC models, and highlights the prominent role that these rigidities play in the transmission of nominal and real shocks.
Keywords
- Cost-push inflation
- Friedman, M
- Inflation
- Inflationary expectations
- Intertemporal optimization
- Keynes, J. M
- Lucas, R
- Microfoundations
- Monetary business cycle models
- Monetary policy rules
- Monetary shocks
- Monetary transmission mechanism
- New Keynesian Phillips curve
- Nominal rigidities
- Nominal shocks
- Nominal wage inflation
- Output gap
- Phelps, E
- Phillips curve
- Price dynamics
- Rational expectations
- Real business cycles
- Real rigidities
- Real shocks
- Staggered contracts model
- Sticky prices
- Sticky wages
- Technology shocks
- Unemployment
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Erceg, C.J. (2018). Monetary Business Cycle Models (Sticky Prices and Wages). In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2852
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2852
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Publisher Name: Palgrave Macmillan, London
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Online ISBN: 978-1-349-95189-5
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