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The Evolution Of Inflation And Unemployment: Explaining The Roaring Nineties

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  • MARIKA KARANASSOU
  • HECTOR SALA
  • DENNIS J. SNOWER

Abstract

This paper analyses the relation between US inflation and unemployment from the perspective of 'frictional growth,' a phenomenon arising from the interplay between growth and frictions. In particular, we focus on the interaction between money growth and nominal frictions. In this context we show that monetary policy has not only persistent, but permanent real effects, giving rise to a long-run inflation-unemployment tradeoff. We evaluate this tradeoff empirically and assess the impact of productivity, money growth, budget deficit, and trade deficit on the US unemployment and inflation trajectories during the nineties. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd/University of Adelaide and Flinders University.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Australian Economic Papers.

Volume (Year): 47 (2008)
Issue (Month): 4 (December)
Pages: 334-354

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Handle: RePEc:bla:ausecp:v:47:y:2008:i:4:p:334-354

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Cited by:
  1. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2006. "Phillips Curves and Unemployment Dynamics: A Critique and a Holistic Perspective," IZA Discussion Papers 2265, Institute for the Study of Labor (IZA).
  2. Ahrens, Steffen & Snower, Dennis J., 2012. "Envy, Guilt, and the Phillips Curve," CEPR Discussion Papers 8796, C.E.P.R. Discussion Papers.
  3. Andrea Vaona, 2013. "Inflation gifts and endogenous growth through learning-by-doing," Working Papers 09/2013, University of Verona, Department of Economics.
  4. Marika Karanassou & Hector Sala, 2008. "Labour Market Dynamics in Australia: What Drives Unemployment?," Discussion Papers 2008-26, School of Economics, The University of New South Wales.
  5. Karanassou, Marika & Sala, Hector, 2010. "The US inflation-unemployment trade-off revisited: New evidence for policy-making," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 758-777, November.
  6. Karanassou, Marika & Sala, Hector, 2009. "The US Inflation-Unemployment Tradeoff: Methodological Issues and Further Evidence," IZA Discussion Papers 4252, Institute for the Study of Labor (IZA).
  7. Ronald Schettkat & Rongrong Sun, 2009. "Monetary policy and European unemployment," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 94-108, Spring.
  8. Ronald Schettkat & Rongrong Sun, 2009. "Nicht zu früh bremsen! - Der Einfluss der Geldpolitik auf die langfristige Wirtschaftsentwicklung in Deutschland und den USA-," Schumpeter Discussion Papers sdp09003, Universitätsbibliothek Wuppertal, University Library.

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