TY  - JOUR
AU  - King,Robert G.
AU  - Haubrich,Joseph G.
TI  - Sticky Prices, Money and Business Fluctuations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1216
PY  - 1983
Y2  - October 1983
UR  - http://www.nber.org/papers/w1216
L1  - http://www.nber.org/papers/w1216.pdf
N1  - Author contact info:
Robert King
Department of Economics
Boston University
270 Bay State Road
Boston, MA  02215
Tel: 617/353-5941
E-Mail: rking@bu.edu

Joseph G. Haubrich
Federal Reserve Bank ofCleveland
1455 East 6th Street
Cleveland, Ohio 44114
Tel: 216/579-2000
E-Mail: jhaubrich@clev.frb.org
AB  - Can nominal contracts make a difference for the neutrality of money if these arise endogenously in general equilibrium? This paper utilizes aversion of Lucas's seminal equilibrium business cycle theory to address this question. However, we depart from Lucas in assuming that (1) agents have complete information about the money stock; (ii) fundamental shocks to the system are purely redistributive and private information; and (iii) moral hazard precludes conventional insurance markets.With an exogenous restriction on contracts, money is fully neutral. But, when this restrictionis lifted, efficient risk-sharing between suppliers and demanders leads to a potential nonneutralitv of money. In particular, if an increase in the money growth rate signals a rise in the dispersion of shocks to demanders' wealth,then prices adjust only partially to monetary shocks and there is a positive association between money and output.
ER  -