Aggregation and stabilization policy in a multi-contract economy

Alan Stuart Blinder, N. Gregory Mankiw

Research output: Contribution to journalArticle

23 Scopus citations

Abstract

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
Volume13
Issue number1
DOIs
StatePublished - Jan 1 1984

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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