Near-rationality/menu costs, strategic complementarity, and real rigidity: An integration

This paper integrates near-rationality/menu cost ideas with strategic complementarity and real rigidity. It is shown that both strategic complementarity and real rigidity aggravate nominal rigidity and make monetary nonneutrality more potent. Also, real rigidity causing nominal rigidity is equivalent to strategic complementarity causing nominal rigidity. Though much has been written about these concepts and their macroeconomic significance, an obvious integration is lacking. This paper is an attempt in that direction.