Does Inflation Grease the Wheels of Adjustment? New evidence from the US economy |
| |
Authors: | Thomas I Palley |
| |
Institution: | Public Policy Department , AFL-CIO, 815 Sixteenth Street, NW, Washington, DC , 20006 , USA |
| |
Abstract: | This paper presents a new interpretation of the Phillips curve that rests on the process of nominal wage adjustment in a multi-sector economy. Nominal demand growth causes inflation in sectors with full employment, but it speeds up the process of employment creation in sectors with unemployment. As a result, demand-pull inflation is associated with both a reduction in the duration of unemployment and the economy wide average rate of unemployment. The paper provides empirical evidence from the US economy consistent with this claim. |
| |
Keywords: | |
|
|