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Inflation and Establishment Turnover

Author

Listed:
  • Gaetano Antinolfi

    (Washington University)

  • David S. Kaplan

    (Instituto Technologico Autonomo de Mexico)

Abstract

We 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.

Suggested Citation

  • Gaetano Antinolfi & David S. Kaplan, 2007. "Inflation and Establishment Turnover," Eastern Economic Journal, Eastern Economic Association, vol. 33(3), pages 317-341, Summer.
    • Handle: RePEc:eej:eeconj:v:33:y:2007:i:3:p:317-341
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume33/V33N3P317_341.pdf
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    References listed on IDEAS

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