Real Wages, Monetary Accommodation, and Inflation

Elhanan Helpman and Leonardo Leiderman

No 3146, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the dynamics of inflation in an economy characterized by a forward-looking, staggered, price and wage determination process, and by monetary accommodation. In our model, inflation reconciles the conflicting claims of workers and firms. The model is capable of generating a positive association between real wages and inflation, of the type that has been observed in some high-inflation countries. It generates a price-wage spiral but does not result in inflationary inertia.

Date: 1989-10
Note: EFG ME
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Published as European Economic Review, Vol. 34, pp. 897-911, (1990).

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Journal Article: Real wages, monetary accommodation, and inflation (1990)
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