Kiel Working Papers, Kiel Institute for World Economics
No 1326:
Long-Run Inflation-Unemployment Dynamics: The Spanish Phillips Curve and Economic Policy
Marika Karanassou, Hector Sala and Dennis Snower
Abstract: This paper takes a new look at the long-run dynamics of
inflation and unemployment in response to permanent changes in the growth
rate of the money supply. We examine the Phillips curve from the
perspective of what we call “frictional growth,” i.e. the interaction
between money growth and nominal frictions. After presenting a theoretical
model of this phenomenon, we construct an empirical model of the Spanish
economy and, in this context, we evaluate the long-run
inflation-unemployment tradeoff for Spain and examine how recent policy
changes have affected it.
Keywords: Inflation-unemployment tradeoff, Phillips curve, staggered wage contracts, nominal inertia, forward-looking expectations, monetary policy; (follow links to similar papers)
JEL-Codes: E2,; E3,; E4,; E5,; J3; (follow links to similar papers)
27 pages, June 2007
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