Working Paper: NBER ID: w4677
Authors: Laurence Ball; N. Gregory Mankiw
Abstract: Macroeconomists are divided on the best way to explain short-run economic fluctuations. This paper presents the case for traditional theories based on short-run price stickiness. It discusses the fundamental basis for believing in this class of macreconomic models. It also discusses recent research on the microeconomic foundations of sticky prices.
Keywords: sticky prices; monetary policy; economic fluctuations
JEL Codes: E31; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Monetary policy shifts (E49) | Real economic activity (E39) |
| Monetary contractions (E49) | Recessions (E32) |
| Volcker disinflation (E31) | Real economic activity (E39) |
| Changes in exchange-rate regimes (F33) | Volatility in real exchange rates (F31) |
| Sticky prices (C54) | Understanding monetary nonneutrality (E49) |
| Sticky prices (C54) | Macroeconomic fluctuations (E39) |
| Contractions in the money supply (E51) | Declines in economic activity (E32) |