The inflation-unemployment trade-off at low inflation
By: Pierpaolo Benigno, Luca Antonio Ricci.
Contributors: Ricci, Luca Antonio.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13986; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13986.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Wage setters take into account the future consequences of their current wage choices in the presence of downward nominal wage rigidities.  Several interesting implications arise.  First, nominal wages tend to be endogenously rigid also upward, at low inflation.  Second, a closed-form solution for a long run Phillips curve relates average unemployment to average wage inflation; the curve is virtually vertical for high inflation rates but becomes flatter as inflation declines.  Third, macroeconomic volatility shifts the Phillips curve outward, implying that stabilization policies can play an important role in shaping the trade-off.  Fourth, when inflation decreases, volatility of unemployment increases whereas the volatility of inflation decreases: this implies a long-run trade-off also between the volatility of unemployment and that of wage inflation"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/9/2008.

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