Recent developments in macroeconomics resurrect the view that wel- fare costs of inflation arise because the latter acts as a tax on money balances. Empirical contributions show that wage re-negotiations take place while expiring contracts are still in place. Bringing these seemingly unrelated aspects together in a stylized general equilibrium model, we ?nd a disciplining e¤ect of a positive inflation target on the wage markup and identify a long-term trade-off between in?ation and output
Tirelli, P., Acocella, N., Di Bartolomeo, G. (2010). Trend inflation, endogenous mark-ups and the non-vertical Phillips curve [Working paper del dipartimento].
Trend inflation, endogenous mark-ups and the non-vertical Phillips curve
TIRELLI, PATRIZIO;
2010
Abstract
Recent developments in macroeconomics resurrect the view that wel- fare costs of inflation arise because the latter acts as a tax on money balances. Empirical contributions show that wage re-negotiations take place while expiring contracts are still in place. Bringing these seemingly unrelated aspects together in a stylized general equilibrium model, we ?nd a disciplining e¤ect of a positive inflation target on the wage markup and identify a long-term trade-off between in?ation and output
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