Macroeconomics without price rigidity

What is it about?

Wage-price rigidity is often at centre-stage in Macroeconomics. This paper does not assume this. And yet, it is shown that we can have macroeconomic difficulties.

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Why is it important?

This academic paper is more in line with the practitioners' side of the story of macroeconomic (and financial) instability. Practitioners here include the policy makers as well. Practitioners see volatility all around in prices such as oil price, exchange rate, asset prices, interest rates or even food price at least in emerging economies. So, macroeconomics needs to pay adequate attention to this phenomenon.