RT Report
T1 Money wage rigidity, monopoly power and hysteresis
A1 Palacio Vera, Alfonso
AB The literature that addresses the effects on the level of aggregate demand of changes in thedegree of monopoly typically assumes away the existence of an “inflation barrier” and an inflationtargeting central bank. The presence of these two institutional factors entails that any aggregate demand change brought about by changes in the functional distribution of income will tend to be offset by changes in real interest rates. We postulate a simple macroeconomic model for a closed economy with a government sector and hypothesize that a change in the average mark up affects the inflation rate, the “inflation-barrier” and aggregate demand. The model allows for the analysis of the effects on the employment rate of demand and supply shocks when the economy exhibits asymmetric inflation dynamics (AID) and hysteresis effects. Among other results we find that, if the economy exhibits AID and hysteresis, the effect on the employment rate of a change in the mark up is likely to be either ineffectual or counterproductive even if the associated demand shock is expansionary. We also show that an inadequate functional distribution of income may lead to the occurrence of an aggregate demand deficiency problem.
PB Facultad de Ciencias Económicas y Empresariales. Decanato
SN 2255-5471
YR 2008
FD 2008
LK https://hdl.handle.net/20.500.14352/56661
UL https://hdl.handle.net/20.500.14352/56661
LA eng
NO Clasificacion JEL: B50, E12, E24, E50
DS Docta Complutense
RD 13 abr 2025