A model of nominal rigidity, or staggered prices, in New Keynesian economics. The Taylor contract assumes nominal prices are set by two or more firms for the same finite number of periods, and different firms adjust prices in different periods. This model was originally formulated by John Taylor for wage-setting by labour unions and later generalized to price-setting by firms. See also Calvo contract.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|