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Inflation and Establishment Turnover

  • Gaetano Antinolfi


    (Washington University)

  • David S. Kaplan

    (Instituto Technologico Autonomo de Mexico)

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.

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Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 33 (2007)
Issue (Month): 3 (Summer)
Pages: 317-341

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Handle: RePEc:eej:eeconj:v:33:y:2007:i:3:p:317-341
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