1 option
Are Prices Too Sticky? / Laurence M. Ball, David Romer.
- Format:
- Book
- Author/Creator:
- Ball, Laurence M.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w2171.
- NBER working paper series no. w2171
- Language:
- English
- Subjects (All):
- Business cycles.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1987.
- Cambridge, Mass : National Bureau of Economic Research, 1987.
- Summary:
- This paper shows that small costs of changing nominal prices can lead to rigidities that cause highly inefficient fluctuations in real variables. As a result, aggregate demand stabilization can be very desirable even though the frictions that cause fluctuations in aggregate demand to have real effects are slight. Inefficient price rigidity arises because rigidity has a negative externality: rigidity in one firm's price increases the variability of real aggregate demand, which hurts all firms. The externality can be arbitrarily large relative to the private costs of rigidity.
- Notes:
- Print version record
- February 1987.
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