TY  - RPRT
        AU  - Karanassou, Marika
AU  - Sala, Hector
AU  - Snower, Dennis J.
        TI  - A Reappraisal of the Inflation-Unemployment Tradeoff
        PY  - 2002/Nov/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 636
        UR  - https://www.iza.org/index.php/publications/dp636
        AB  - This paper offers a reappraisal of the inflation-unemployment tradeoff, based on "frictional
growth" describing the interplay between nominal frictions and money growth. When the
money supply grows in the presence of price inertia (due to staggered wage contracts with
time discounting), the price adjustments to each successive change in the money supply are
never able to work themselves out fully. In this context, monetary shocks have a gradual and
delayed effect on inflation, and these shocks also generate plausible impulse-responses for
unemployment. Although our theory contains no money illusion, no permanent nominal
rigidities, and no departure from rational expectations, there is a long-run inflation-unemployment
tradeoff.
        KW  - inflation
KW  - unemployment
KW  - Phillips curve
KW  - nominal inertia
KW  - wage-price staggering
KW  - monetary policy
KW  - business cycles
KW  - forward-looking expectations
        ER  -