Scandinavian Working Papers in Economics

Working Paper Series,
Stockholm University, Swedish Institute for Social Research

No 5/2020: Explaining Inflation and Unemployment

Ante Farm ()
Additional contact information
Ante Farm: Swedish Institute for Social Research, Stockholm University, Postal: SOFI, Stockholm University, SE-106 91 Stockholm, Sweden

Abstract: This paper explains inflation and unemployment starting from new baseline models of price formation and labor demand. Inflation is always and everywhere a pricing phenomenon. Unemployment is every year determined as a residual, as people in the labor force without employment. Employment is determined by production and labor productivity, while production is determined by spending (as measured by nominal GDP) at prices set by firms.

Keywords: Inflation; employment; unemployment

JEL-codes: E24; E31

29 pages, First version: May 31, 2020. Revised: September 19, 2020.

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FULLTEXT02.pdf PDF-file Full text, revised version

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