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

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Author Info

  • Marika Karanassou

    ()
    (Department of Economics, Queen Mary, University of London)

  • Hector Sala

    ()
    (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)

  • Dennis J.Snower

    ()
    (Department of Economics, Birkbeck College, University of London)

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 trade for Spain and examine how recent policy changes have afected it.

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Bibliographic Info

Paper provided by Department of Applied Economics at Universitat Autonoma of Barcelona in its series Working Papers with number wpdea0211.

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Length: 42 pages
Date of creation: Nov 2002
Date of revision:
Handle: RePEc:uab:wprdea:wpdea0211

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

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References

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