Publication
Jun 2007
This paper argues that there is a non-zero inflation-unemployment tradeoff in the long-run due to frictional growth, a phenomenon that encapsulates the interplay of nominal staggering and money growth. The existence of a downward-sloping long-run Phillips curve suggests the development of a holistic framework that can jointly explain the evolution of inflation and unemployment. The authors estimate an interactive dynamics model for the US that includes wage-price setting and labor market equations. They then evaluate the inflation-unemployment tradeoff and assess the impact of productivity, money growth, budget deficit and trade deficit on the unemployment and inflation trajectories during the 1990s.
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English (PDF, 36 pages, 435 KB) |
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Author | Marika Karanassou, Hector Sala, Dennis J Snower |
Series | Kiel Institute Working Papers |
Issue | 1350 |
Publisher | Kiel Institute for the World Economy |
Copyright | © 2007 Kiel Institute for the World Economy |