The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment

N. Gregory Mankiw

Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research

Abstract: | Paper

This paper discusses the short-run tradeoff between inflation and unemployment. Although this tradeoff remains a necessary building block of business cycle theory, economists have yet to provide a completely satisfactory explanation for it. According to the consensus view among central bankers and monetary economists, a contractionary monetary shock raises unemployment, at leasst temporarily, and leads to a delayed and gradual fall in inflation. Standard dynamic models of price adjustment, however, cannot explain this pattern of responses. Reconciling the consensus view about the effects of monetary policy with models of price adjustment remains an outstanding puzzle for business cycle theorists.

Date: 2000
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mon
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Citations: View citations in EconPapers (31)

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Related works:
Journal Article: The Inexorable and Mysterious Tradeoff between Inflation and Unemployment (2001)
Working Paper: The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:harver:1905

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