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Long-Run Inflation-Unemployment Dynamics: The Spanish Phillips Curve and Economic Policy

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  • Karanassou, Marika
  • Sala, Hector
  • Snower, Dennis J.

Abstract

This Paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call ‘frictional growth’, i.e. the interaction between money growth and nominal frictions. After presenting theoretical models of this phenomenon, we construct an empirical model of the Spanish economy and, in this context, we evaluate the long-run inflation-unemployment tradeoff for Spain and examine how recent policy changes have affected it.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3690.

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Date of creation: Jan 2003
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Handle: RePEc:cpr:ceprdp:3690

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Keywords: forward-looking expectations; inflation-unemployment tradeoff; monetary policy; nominal inertia; phillips curve; staggered wage contracts;

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References

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