MONEY AND WAGE CONTRACTS IN AN OPTIMIZING MODEL OF THE BUSINESS-CYCLE

This article presents an explicitly computable business cycle model wi th optimizing agents in an economy with money and wage contracts. We s tart from the well-known Long-Plosser-McCallum real business cycle mod el and extend it in two directions: First, money is introduced, still maintaining the market clearing assumption. Secondly, this monetary mo del is studied under the assumption of predetermined wages. An explici t solution is given in both cases. It appears that the combination of money and nonclearing markets allows to give a synthetic view between usual 'real business cycles' results and traditional Keynesian ones. W e apply it in particular to specify the cyclical properties of real wa ges and prices.