On the Output-Inflation Relationship When Price and Quantity Adjustments are Costly

TY - UNPB

T1 - On the Output-Inflation Relationship When Price and Quantity Adjustments are Costly

AU - Danziger, Leif

AU - Kreiner, Claus Thustrup

N1 - JEL Classification: E31

PY - 2000

Y1 - 2000

N2 - A vast literature analyzes the real effects of price-adjustment costs assuming that quantity adjustments are costless. In this paper, we analyze whether the presence of quantity-adjustments costs, which presumably are significant, change the traditional results on the impact of inflation. In particular, recent findings suggest that quantity-adjustment costs may remove the linkage between output and inflation. We show that this is not the case when inflation is anticipated. On the contrary, quantity-adjustment costs may significantly amplify the consequences of price-adjustment costs

AB - A vast literature analyzes the real effects of price-adjustment costs assuming that quantity adjustments are costless. In this paper, we analyze whether the presence of quantity-adjustments costs, which presumably are significant, change the traditional results on the impact of inflation. In particular, recent findings suggest that quantity-adjustment costs may remove the linkage between output and inflation. We show that this is not the case when inflation is anticipated. On the contrary, quantity-adjustment costs may significantly amplify the consequences of price-adjustment costs

M3 - Working paper

BT - On the Output-Inflation Relationship When Price and Quantity Adjustments are Costly

PB - University of Munich

ER -