EconPapers    
Economics at your fingertips  
 

The impact of growth on unemployment in a low vs. a high inflation environment

Mewael F. Tesfaselassie and Maik Wolters

No 113, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: During the 1970s, industrial countries, including the US and continental Europa, experienced a combination of slow productivity growth and high unemplyoment. Subsequent research has shown that the standard model of unemployment actually gives counterfactual predictions. Motivated by the observation that the 1970s were also characterized by high and rising inflation, Tesfaselassie and Wolters examine the effect of growth on unemployment in the presence of nominal price rigidity. The authors demonstrate that the effect of growth on unemployment may be positive or negative. Faster growth leads to lower unemployment if the rate of inflation is high enough. There is a threshold level of inflation below which faster growth leads to higher unemployment and above which faster growth leads to lower unemployment. The threshold level in turn depends on labor market characteristics, such as hiring efficiency, the job destruction rate, workers' relative bargaining power and the opportunity cost of work.

Keywords: growth; trend inflation; unemployment (search for similar items in EconPapers)
JEL-codes: E24 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/157241/1/884602117.pdf (application/pdf)

Related works:
Journal Article: The Impact of Growth on Unemployment in a Low vs. High Inflation Environment (2018) Downloads
Working Paper: The impact of growth on unemployment in a low vs. a high inflation environment (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:imfswp:113

Access Statistics for this paper

More papers in IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2019-04-18
Handle: RePEc:zbw:imfswp:113