Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule

@article{Fischer1977LongTermCR,
  title={Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule},
  author={Stanley Fischer},
  journal={Journal of Political Economy},
  year={1977},
  volume={85},
  pages={191 - 205}
}
  • S. Fischer
  • Published 1977
  • Economics
  • Journal of Political Economy
The paper is concerned with the role of monetary policy and argues that activist monetary policy can affect the behavior of real output, rational expectations notwithstanding. A rational expectations model with overlapping labor contracts is constructed, with each labor contract being made for two periods. These contracts inject an element of short-run wage stickiness into the model. Because the money stock is changed by the monetary authority more frequently than labor contracts are… Expand
Labor contracts and the role of monetary policy in an overlapping generations model
This paper extends the optimal labor contracts literature to consider an environment with both real and nominal shocks. In an overlapping generations model, we compare alternative means of tradingExpand
Labor contracts, informational discrepancies and the role of monetary policy
Abstract This paper examines output stabilization and inflationary consequences of short-run monetary policy. The macroeconomic framework incorporates informational discrepancies between the monetaryExpand
Long-term contracts, imperfect information, and monetary policy
Abstract This paper considers the implications of imperfect information for monetary policy in a model with rational expectations and long-term contracts. The source of uncertainty is the inabilityExpand
Labor contracts and monetary policy
Abstract Fischer and others have shown that the very existence of long-term contracts can imply a stabilization role for monetary policy in models that incorporate the natural rate hypothesis andExpand
Long-Term Contracts as a Strategic Device 1
This paper shows that in a two-sector labor market, union choice between short and longterm nominal-wage contracts involves a trade-off between expected levels of inflation and unemployment and theirExpand
Open-economy macro policies and the micro foundation of labor market arrangements
Abstract In this paper we assume that risk neutral firms provide income insurance to risk averse workers through labor contracts; however, because of (ad hoc) transaction costs, contracts are notExpand
Long-term contracts, expectations and wage inertia
Abstract This paper develops a macro model of contractual wage setting that is used to test the importance that increased contract length has in generating wage inertia. Using an errors-in-variablesExpand
Monetary policy and the timing of wage negotiations
Abstract In a model of long-term labor contracts, the simultaneous determination of the pattern of contract negotiation and the pattern of monetary-policy intervention yields a Nash equilibrium inExpand
Long-Term Contracts and the Effectiveness of Demand and Supply Policies
IN RECENT YEARS, the economy has been characterized by simultaneous labor-market slack, accelerating inflation, and a progression of real shocks. In response to these events, nontraditional aggregateExpand
OPTIMAL UNION WAGE SETTING BEHAVIOUR, AND THE EFFECTIVENESS OF SHORT-RUN MONETARY STABLIZATION POLICY
A model of union wage setting behavior is developed in which monetary stabilization policy is generally effective, at least in the short-run. Because of asymmetries in union objective functions,Expand
...
1
2
3
4
5
...

References

SHOWING 1-10 OF 33 REFERENCES
"Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule
Alternative monetary policies are analyzed in an ad hoc macroeconomic model in which the public's expectations about prices are rational. The ad hoc model is one in which there is long-runExpand
Implicit Contracts and Underemployment Equilibria
This paper studies an industry with demand uncertainty which prompts risk-neutral firms to act both as employers and as insurers of homogeneous, risk-averse laborers. The resulting contractualExpand
STABILIZING POWERS OF MONETARY POLICY UNDER RATIONAL EXPECTATIONS
Publisher Summary This chapter discusses the sense in which monetary policy, even systematic and correctly anticipated policy, can make a difference for the stability of output in a rationalExpand
Expectations and the neutrality of money
This paper provides a simple example of an economy in which equilibrium prices and quantities exhibit what may be the central feature of the modern business cycle: a systematic relation between theExpand
Wages and Employment under Uncertain Demand
This paper examines some implications of two postulates for firms' wage and employment policies. The first is that firms, or stockholders, have easier access to capital markets at lower costs orExpand
Rational expectations and the role of monetary policy: A generalization
Abstract This paper investigates the effects of introducing the following two alterations into a multimarket, partial information, rational expectations model; (1) individuals in any market mayExpand
Phillips Curves, Expectations of Inflation and Optimal Unemployment over Time: Comment
It has been customary to specify the objectives of macro-economic policy in terms of targets with such labels as "non-inflationary full employment" (despite the doubts raised by the Phillips Curve asExpand
Efficiency of the Natural Rate
During the sixties a cornerstone of economic policy was that permanent inflation results in high levels of economic activity. This was based in large part on the observation that prices and output,Expand
Alternative Responses of Policy to External Supply Shocks
DURING 1973 and 1974 reductions in supplies of food (through natural causes) and of oil (through unnatural causes) simultaneously lowered the real income of U.S. nonfarm workers and raised the rateExpand
Some International Evidence on Output-Inflation Tradeoffs.
This paper reports the results of an empirical study of real output-inflation tradeoffs, based on annual time-series from eighteen countries over the years 1951-67. These data are examined from theExpand
...
1
2
3
4
...