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Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51894

Berentsen, Aleksander; Menzio, Guido; Wright, Randall (2009). Inflation and Unemployment in the Long Run. Working paper series / Institute for Empirical Research in Economics No. 442, University of Zurich.

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Abstract

We study the long-run relation between money, measured by inflation or interest rates, and unemployment. We first document in the data a positive relation between these variables at low frequencies. We then develop a framework where unemployment and money are both modeled using microfoundations based on search and bargaining theory, providing a unified theory for analyzing labor and goods markets. The calibrated model shows that money can account for a sizable fraction of trends in unemployment. We argue it matters, qualitativelynand quantitatively, whether one uses monetary theory based on search and bargaining, or an alternative ad hoc specification.

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
DDC:330 Economics
Language:English
Date:September 2009
Deposited On:29 Nov 2011 21:09
Last Modified:09 Jul 2012 07:01
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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