A Search Model of Unemployment and Inflation* |
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Authors: | Etienne Lehmann |
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Affiliation: | CREST, FR‐92245 Malakoff, France etienne.lehmann@ensae.fr |
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Abstract: | This paper introduces money into the standard labor‐matching model. A double‐coincidence problem makes money necessary as a medium of exchange. In the long run, a rise in the growth rate of money leads to higher inflation and higher unemployment, such that the long‐run Phillips curve is not vertical. The optimal monetary growth rate decreases with greater worker bargaining power, the level of unemployment benefits, and the payroll tax rate. |
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Keywords: | Inflation unemployment search‐matching Friedman rule E24 E52 J64 |
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