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

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Author Info

  • Karanassou, Marika

    ()
    (Queen Mary, University of London)

  • Sala, Hector

    ()
    (Universitat Autònoma de Barcelona)

  • Snower, Dennis J.

    ()
    (Kiel Institute for the World Economy)

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 645.

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Length: 42 pages
Date of creation: Nov 2002
Date of revision:
Publication status: published in: Journal of Policy Modeling, 2008, 30 (2), 279-300
Handle: RePEc:iza:izadps:dp645

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

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References

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