Publication
Jun 2007
This paper assesses the effect of inflation on output and unemployment. Using a standard dynamic general equilibrium model, the authors show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long-run effects on real variables. They argue that therefore unemployment cannot be decomposed into cyclical and structural components and conclude that the concept of a NAIRU needs to be reconsidered.
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English (PDF, 31 pages, 221 KB) |
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Author | Liam Graham, Dennis J Snower |
Series | Kiel Institute Working Papers |
Issue | 1346 |
Publisher | Kiel Institute for the World Economy |
Copyright | © 2007 Kiel Institute for the World Economy |