Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/128920 
Authors: 
Year of Publication: 
2010
Series/Report no.: 
WIFO Working Papers No. 360
Publisher: 
Austrian Institute of Economic Research (WIFO), Vienna
Abstract: 
The paper modifies a standard NAIRU model by implementing "pricing-to-market" as the basic assumption for the price setting behaviour of firms in an open economy. This entirely changes the outcomes of the model: First, inflation in equilibrium is stable at any rate of unemployment; the long-run Phillips curve is horizontal. Second, income distribution varies with the level of employment. Third, supplemented with a demand equation which allows for effects of both income distribution and international competitiveness, the NAIRU ceases to be a "strong attractor". These characteristics to a certain extent open up the space for expansive wage and demand policies.
Subjects: 
Wages
Inflation
NAIRU
Demand
Distribution
Document Type: 
Working Paper

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