Nominal Income and the Inflation-Growth Divide

Sheetal Chand

No 1997/147, IMF Working Papers from International Monetary Fund

Abstract: This paper deals with aggregate demand fluctuations and their price and output effects. Starting with a nominal income solution, a rule for determining the inflation and output growth effects is presented. Assigning alternative values to the key parameters of the suggested rule generates different closure rules, such as the classical and the Keynesian and their modern counterparts. An application to major industrial country data indicates that the suggested rule is robust. Both inflation and output growth are affected by nominal shocks, but response patterns vary among the countries.

Keywords: WP; inflation rate; growth rate; Phillips curve; macroeconomic analysis; nominal income; inflation; output; G-7 countries; rate of inflation; growth solution; cross-equation restriction; inflation effect; income growth; growth equation; Production growth; Personal income; Wages; Potential output (search for similar items in EconPapers)
Pages: 32
Date: 1997-11-01
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