Arbeitspapier
Nonlinear unemployment effects of the inflation tax
We argue that long-run inflation has nonlinear and state-dependent effects on unemployment, output, and welfare. Using panel data from the OECD, we document three correlations. First, there is a positive long-run relationship between anticipated inflation and unemployment. Second, there is also a positive correlation between anticipated inflation and unemployment volatility. Third, the long-run inflation-unemployment relationship is not only positive, but also stronger when unemployment is higher. We show that these correlations arise in a standard monetary search model with two shocks - productivity and monetary - and frictions in labor and goods markets. Inflation lowers the surplus from a worker-firm match, in turn making it sensitive to productivity shocks or to further increases in inflation. We calibrate the model to match the US postwar labor market and monetary data and show that it is consistent with observed cross-country correlations. The model implies that the welfare cost of inflation is nonlinear in the level of inflation and is amplified by the presence of aggregate shocks.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Paper ; No. 390
- Klassifikation
-
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Money and Interest Rates: General
Monetary Policy, Central Banking, and the Supply of Money and Credit: General
- Thema
-
Money
search
inflation
unemployment
unemployment volatility
fundamental surplus
product-labor market interaction
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Lahcen, Mohammed Ait
Baughman, Garth
Rabinovich, Stanislav
van Buggenum, Hugo
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Zurich, Department of Economics
- (wo)
-
Zurich
- (wann)
-
2021
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 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 Ait
- Baughman, Garth
- Rabinovich, Stanislav
- van Buggenum, Hugo
- University of Zurich, Department of Economics
Entstanden
- 2021
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