Empirical evidence on nominal wage and price flexibility

Timothy Cogley

    Research output: Contribution to journalArticlepeer-review


    This paper tests a necessary condition for the neutrality of money in a framework that imposes only weak restrictions on the money supply process. It extends Bernanke's [1986] work by weakening the set of just-identifying restrictions and by providing a statistical test of the overidentifying restrictions. Instead of specifying a structural model to identify primitive shocks, I deduce the impact effects of structural money shocks under the neutrality hypothesis and then test whether the system maintains neutrality as it propagates these impact effects. The tests reject neutrality for both the M1 and the monetary base.

    Original languageEnglish (US)
    Pages (from-to)475-491
    Number of pages17
    JournalQuarterly Journal of Economics
    Issue number2
    StatePublished - May 1993

    ASJC Scopus subject areas

    • Economics and Econometrics


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