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Title:A reappraisal of the inflation-unemployment tradeoff PDF Logo
Authors:Karanassou, Marika
Sala, Héctor
Snower, Dennis J.
Issue Date:2002
Series/Report no.:IZA Discussion paper series 636
Abstract:This paper offers a reappraisal of the inflation-unemployment tradeoff, based on ?frictional growth? describing the interplay between nominal frictions and money growth. When the money supply grows in the presence of price inertia (due to staggered wage contracts with time discounting), the price adjustments to each successive change in the money supply are never able to work themselves out fully. In this context, monetary shocks have a gradual and delayed effect on inflation, and these shocks also generate plausible impulse-responses for unemployment. Although our theory contains no money illusion, no permanent nominal rigidities, and no departure from rational expectations, there is a long-run inflationunemployment tradeoff.
Subjects:inflation
unemployment
Phillips curve
nominal inertia
wage-price staggering
monetary policy
business cycles
forward-looking expectations
JEL:E5
J3
E2
E3
E4
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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