Arbeitspapier
Money, inflation, and unemployment in the presence of informality
This paper studies the impact of informality on the long-run relationship between inflation and unemployment in developing economies. I present a dynamic general equilibrium model with informality in both labor and goods markets and where money and credit coexist. An increase in inflation affects unemployment through two channels: the matching channel and the hiring channel. On one hand, higher inflation reduces the surplus of monetary trades thus lowering firms entry and increasing unemployment. On the other hand, the lower impact of inflation on formal transactions where credit is partially available shifts firms hiring decision from high separation informal jobs to low separation formal jobs thus reducing unemployment. The model is calibrated to match certain long-run statistics of the Brazilian economy. Numerical results indicate that, in the presence of a sizable informal sector, inflation has a small negative effect on unemployment while producing a significant impact on labor allocation between formal and informal jobs. These results point to the importance of accounting for informality when considering the inflation-unemployment trade-off in the conduct of monetary policy.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Paper ; No. 248
- Klassifikation
-
Wirtschaft
Informal Economy; Underground Economy
Demand for Money
Unemployment: Models, Duration, Incidence, and Job Search
Tax Evasion and Avoidance
Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- Thema
-
Informality
Phillips curve
money
labor
search and matching
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Lahcen, Mohammed Aït
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Zurich, Department of Economics
- (wo)
-
Zurich
- (wann)
-
2017
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Lahcen, Mohammed Aït
- University of Zurich, Department of Economics
Entstanden
- 2017
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