Inertial inflation and Phillips curve

Luiz Carlos Bresser-Pereira () and Yoshiaki Nakano ()

Brazilian Journal of Political Economy, 1986, vol. 6, issue 2, 237-243

Abstract: This note introduces the problem of indexation of wages, exchange rate, andother prices in the Phillips’ curve. With this aim, we developed a simplified model of theinflationary process decomposing it in (1) inertial inflation; (2) the Phillips’ curve; (3) administeredor supply shock inflation. Using this model, first we show that a supply shock shiftsthe Phillips’ curve accelerating the trend rate of inertial inflation. Second, that a continuousdemand pressure through Phillips’ curve leads to continuous acceleration of the rate of inflation.And third, that a rise in the rate of unemployment may lead to an oligopolistic increasein the profit margin, which also leads a shift in the Phillips’ curve and an acceleration ofinflation. JEL Classification: E31; E24.

Keywords: Inflation; Phillips curve (search for similar items in EconPapers)
Date: 1986
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