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

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  • Marika Karanassou

    ()
    (Queen Mary, University of London)

  • Hector Sala

    (Universitat Aut�noma de Barcelona)

  • Dennis J. Snower

    (Birkbeck College)

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 Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 477.

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Date of creation: Dec 2002
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Handle: RePEc:qmw:qmwecw:wp477

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Keywords: Inflation-unemployment tradeoff; Phillips curve; Staggered wage contracts; Nominal inertia; Forward-looking expectations; Monetary policy;

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References

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