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Inflation and unemployment: Lagos-Wright meets Mortensen-Pissarides

Author

Listed:
  • Randall Wright

    (University Pennsylvania)

  • Guido Menzio

    (University Pennsylvania)

  • Aleksander Berentsen

    (University of Basel)

Abstract

Inflation and unemployment are central issues in macroeconomics. While much progress has been made on these issues by incorporating frictions using search theory, existing models analyze either unemployment or inflation. We develop a framework to analyze unemployment and inflation together. This makes contributions to disparate literatures, and provides a united model for theory, policy, and quantitative analysis. We discuss optimal fiscal and monetary policy. We calibrate the model, and discuss the extent to which it can account for salient aspects of a half century's experience with ination, unemployment, interest rates, and velocity.

Suggested Citation

  • Randall Wright & Guido Menzio & Aleksander Berentsen, 2007. "Inflation and unemployment: Lagos-Wright meets Mortensen-Pissarides," 2007 Meeting Papers 237, Society for Economic Dynamics.
  • Handle: RePEc:red:sed007:237
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    References listed on IDEAS

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    Cited by:

    1. Philipp Kircher & Jan Eeckhout, 2008. "Prices as Optimal Competitive Sales Mechanisms," 2008 Meeting Papers 504, Society for Economic Dynamics.
    2. Lehmann, Etienne & Van Der Linden, Bruno, 2010. "Search Frictions On Product And Labor Markets: Money In The Matching Function," Macroeconomic Dynamics, Cambridge University Press, pages 56-92.
    3. Sergio Parra Cely, 2009. "Costos De Inflación En Un Modelo De Búsqueda Monetaria Con Formación Endógena De Precios: El Caso Colombiano," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 27(59), pages 46-82, Junio.
    4. Alok Kumar, 2013. "Labor Markets, Unemployment and Optimal Inflation," Department Discussion Papers 1303, Department of Economics, University of Victoria.
    5. Reicher, Christopher Phillip, 2009. "What can a New Keynesian labor matching model match?," Kiel Working Papers 1496, Kiel Institute for the World Economy (IfW).

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