TY  - JOUR
AU  - Blanchard,Olivier J.
TI  - The Wage Price Spiral
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1771
PY  - 1985
Y2  - December 1985
UR  - http://www.nber.org/papers/w1771
L1  - http://www.nber.org/papers/w1771.pdf
N1  - Author contact info:
Olivier J. Blanchard
International Monetary Fund
Economic Counsellor and Director
Research Department
700 19th Street, NW
Rm. 10-700
Washington DC, 20431
Tel: 202-623-7825
Fax: 202-623-7271
E-Mail: blanchar@mit.edu
AB  - This paper rehabilitates the old wage price spiral. It shows that, after an increase in aggregate demand, the process of adjustment of nominal prices and nominal wages results from attempts by workers to maintain or increase their real wage and by firms to maintain or increase their markups of prices over wages. Under continuous price and wage setting, the process of adjustment would be instantaneous ; under staggering of price and wage decisions, the adjustment takes time. The more inflexible real wages and markups are to shifts in demand, the higher is the degree of price level inertia, the longer lasting are the effects of aggregate demand on output.
ER  -