Staggered Nominal Contracts: Taylor Vs. Calvo

Jangyoul Kim and Gieyoung Lim
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Jangyoul Kim: Hankuk University of Foreign Studies
Gieyoung Lim: Hankuk University of Foreign Studies

Korean Economic Review, 2007, vol. 23, 65-87

Abstract: This paper compares the Taylor type and the Calvo type staggering schemes in terms of their implications on the behavior of aggregate price and output following a monetary expansion. In the sticky nominal price case, it is shown that Calvo type staggering implies positive autocorrelations (i.e., monotone dampening) in price and output, while Taylor type staggering implies negative autocorrelations (i.e., oscillatory dampening). In the sticky nominal wage case, however, it is found that both types of staggering generate monotonically dampening responses of price and output. In other words, the qualitative implications of wage stickiness are robust to the choice of staggering schemes.

Keywords: Nominal Rigidities; Staggered Wage-setting; Staggered Pricesetting; Taylor type; Calvo type (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2007
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