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http://hdl.handle.net/10419/2905
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| Title: | | A reappraisal of the inflation-unemployment tradeoff  |
| 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 Economists Online IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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