Philips curves, monetary policy, and a labor market transmission mechanism
By: Robert R. Reed and Stacey L. Schreft.
Contributors: Schreft, Stacey Lee.; Federal Reserve Bank of Kansas City. Research Division.
Series: RWP -- 07-12
Publisher: Research Division, Federal Reserve Bank of Kansas City
Published: 2007
Place of publication: Kansas City [Mo.]
Language: eng
Format: Electronic resource
Description: This paper develops a general equilibrium monetary model with performance incentives to study the inflation-unemployment relationship. A long-run downward-sloping Phillips curve can exist with perfectly anticipated inflation because workers' incentive to exert effort depend on financial market returns. Consequently, higher inflation rates can reduce wages and stimulate employment. An upward-sloping or vertical Phillips Curve can arise instead, depending on agents' risk aversion and the possibility of capital formation. Welfare might be higher away from the Friedman rule and with a central bank putting some weight on employment.
Notes: Title from PDF file (viewed on Oct. 10, 2008).

"December 2007."

Includes bibliographical references.

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