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The evolution of inflation and unemployment: Explaining the roaring nineties

Listed author(s):
  • Karanassou, Marika
  • Sala, Héctor
  • Snower, Dennis J.

This paper argues that there is a nonzero inflation-unemployment tradeoff in the long-run due to frictional growth, a phenomenon that encapsulates the interplay of nominal staggering and money growth. The existence of a downward-sloping long-run Phillips curve suggests the development of a holistic framework that can jointly explain the evolution of inflation and unemployment. Hence, we estimate an interactive dynamics model for the US that includes wage-price setting and labour market equations. We then evaluate the inflation-unemployment tradeoff and assess the impact of productivity, money growth, budget deficit, and trade deficit on the unemployment and inflation trajectories during the nineties.

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File URL: https://www.econstor.eu/bitstream/10419/4032/1/kap1350.pdf
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Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Working Papers with number 1350.

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Date of creation: 2007
Handle: RePEc:zbw:ifwkwp:1350
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  40. repec:rus:hseeco:317877 is not listed on IDEAS
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