Inflation and Establishment Turnover
AbstractWe study a channel through which inflation can have effects on the real economy. Using job creation and destruction data from U.S. manufacturing establishments from 1973-1988, we show that both jobs created by new establishments and jobs destroyed by dying establishments are negatively correlated with inflation. These results are robust to controls for the real-business cycle and monetary policy. Over a longer time frame, data on business failures confirm our results obtained from job creation and destruction data. We discuss how interaction of inflation with financial-markets, nominal-wage rigidities, and imperfect competition could explain the empirical evidence.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 33 (2007)
Issue (Month): 3 (Summer)
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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
Web page: http://www.ramapo.edu/eea/journal.html
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