|
|
Article: Evidence on nominal wage rigidity from a panel of U.S. manufacturing industries.
- Article from:
- Journal of Money, Credit & Banking
- Article date:
- November 1, 1996
- Author:
CopyrightCOPYRIGHT 1996 Ohio State University Press. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
UNDERSTANDING WHY NOMINAL DISTURBANCES affect real activity is a central concern in macroeconomic research. The papers by Gray (1976), Fischer (1977), and Taylor (1979) offered a simple explanation for this phenomenon. Essentially, these authors assumed that firms and workers enter into implicit or explicit contracts of the following form. nominal wages are set in advance of the realization of the nominal disturbance, whereas the level of employment is chosen by the firm, along its labor demand curve, after the realization of the disturbance. Under such contractual agreements, a nominal disturbance - such as an unexpected increase in the price level@lowers real wages and ...