and Harald Lang
Bo Axell: Research Institute of Industrial Economics (IFN)
Harald Lang: Research Institute of Industrial Economics (IFN)
Abstract: How are inflation and unemployment related in the long run? Are they negatively correlated, as in the so-called naive Phillips curve theories or uncorrelated, "as in the neo-liberals' view or are they positively correlated as Friedman suggested in his Nobel lecture? In this paper inflation is introduced into a general equilibrium search unemployment model. We show that it is possible to get either a negatively or a positively sloping long-run Phillips curve, all depending on the source of inflation.
28 pages, December 1985
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