Aggregation and stabilization policy in a multi-contract economy

Alan S. Blinder, N. Gregory Mankiw

Research output: Contribution to journalArticlepeer-review

26 Scopus citations


This paper presents a model of a multi-sector economy in which each sector is characterized by a different type of wage or price stickness. The various sectors experience the same exogenous shocks and have the same money supply. The analysis shows that demand shocks pose no serious problems for stabilization policy. In contrast, supply shocks may force the policymaker to choose between stability in one sector and stability in another. The analysis also shows that the economist as to the economy's underlying structure and obscures the tradeoffs the policymaker must confront. In particular, a feedback rule chosen on the basis of an aggregate model could be either better or worse than a passive policy.

Original languageEnglish (US)
Pages (from-to)67-86
Number of pages20
JournalJournal of Monetary Economics
Issue number1
StatePublished - Jan 1984

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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