High inflation and real wages /

This paper suggests a simple general equilibrium explanation, without relying on nominal rigidities. It presents an intertemporal two-sector model with a cash-in-advance constraint. In this setting, inflation reduces real wages through (1) a decline of the capital stock, and (2) a shift in relative...

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Bibliographic Details
Main Author: Braumann, Benedikt
Format: Book
Language:English
Published: Washington, D.C. : International Monetary Fund, 2001
Series:IMF working paper ; no. WP/01/50
Subjects:
Online Access:http://www.imf.org/external/pubs/ft/wp/2001/wp0150.pdf
Description
Summary:This paper suggests a simple general equilibrium explanation, without relying on nominal rigidities. It presents an intertemporal two-sector model with a cash-in-advance constraint. In this setting, inflation reduces real wages through (1) a decline of the capital stock, and (2) a shift in relative prices. The two effects are additive and make the decline in real wages exceed the decline in per-capita GDP. This mechanism may contribute to rising poverty during periods of high inflation.
Physical Description:23 p.
Bibliography:Bibliografía: p. 22-23.