Models of Inflation: A Taxonomy of Effects

In this study the author uses three wage equations and three price equations to examine the effect on wages and prices of various shocks. Different combinations of wage and price equations yield very different results when subjected to excess demand shocks and to exogenous price shocks. The results of the shocks are explained in terms of the general characteristics of the models used. The author also examines the effect of increasing the lags in the wage and price equations on the inflationary responses to the shocks.