The evolution of inflation and unemployment: Explaining the roaring nineties

Marika Karanassou, Hector Sala and Dennis J. Snower

No 1350, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: 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.

Keywords: Unemployment dynamics; Phillips curve; Roaring nineties; Inflation dynamics (search for similar items in EconPapers)
JEL-codes: E24 E31 E51 E62 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: THE EVOLUTION OF INFLATION AND UNEMPLOYMENT: EXPLAINING THE ROARING NINETIES (2008)
Working Paper: The Evolution of Inflation and Unemployment: Explaining the Roaring Nineties (2007)
Working Paper: The Evolution of Inflation and Unemployment: Explaining the Roaring Nineties (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1350

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