The Evolution of Inflation and Unemployment: Explaining the Roaring Nineties

Marika Karanassou (), Hector Sala and Dennis Snower

No 2900, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyses the relation between US inflation and unemployment from the perspective of "frictional growth," a phenomenon arising from the interplay between growth and frictions. In particular, we examine the interaction between money growth (on the one hand) and various real and nominal frictions (on the other). In this context we show that monetary policy has not only persistent, but permanent real effects, giving rise to a long-run inflation-unemployment tradeoff. We evaluate this tradeoff empirically and assess the impact of productivity, money growth, budget deficit, and trade deficit on the US unemployment and inflation trajectories during the nineties.

Keywords: inflation dynamics; roaring nineties; unemployment dynamics; Phillips curve (search for similar items in EconPapers)
JEL-codes: E24 E31 E51 E62 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2007-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

Published - published in: Australian Economic Papers, 2008, 47 (4), 334-354

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Related works:
Journal Article: THE EVOLUTION OF INFLATION AND UNEMPLOYMENT: EXPLAINING THE ROARING NINETIES (2008)
Working Paper: The Evolution of Inflation and Unemployment: Explaining the Roaring Nineties (2007)
Working Paper: The evolution of inflation and unemployment: Explaining the roaring nineties (2007)
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