NATIONAL BUREAU OF ECONOMIC RESEARCH
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Price Contracts, Output, and Monetary Disturbances

Alan C. Stockman

NBER Working Paper No. 1960
Issued in June 1986
NBER Program(s):Economic Fluctuations and Growth Program

This paper presents a simp1e example in which incomplete asset markets create

incentives for buyers and sellers to sign contracts that specify a price

function which differs from the spot market equilibrium price function. The

price function can exhibit downward stickiness in nominal prices, In the

sense that a fall in the money supply reduces nominal prices less than

proportionately and reduces real output. This equilibrium dominates spot

market equilibrium in terms of expected utility.

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Document Object Identifier (DOI): 10.3386/w1960

Published: Stockman, Alan C. "Price Contracts, Output, and Monetary Disturbances," from Finance Constraints, Expectations, and Macroeconomics, ed. by Meir Kohnand S.C. Tsiang, Oxford, England: Oxford University Press, 1988.

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