Unemployment and the demand for money

Arbeitspapier

We develop a dynamic general equilibrium model to analyze the relationship between monetary policy, money demand, and unemployment. Our model succeeds in replicating the empirical fact of a downward sloping Phillips curve for low inflation rates and an upward sloping curve for high inflation rates. The reason is that low inflation rates make saving, as opposed to consumption, more attractive. Less consumption is associated with less output and therefore higher unemployment. To the contrary, when inflation exceeds a certain threshold, money is too costly to hold, which results in a decrease in output and an increase in unemployment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 324

Classification and Topics

• Classification: Wirtschaft ; Micro-Based Behavioral Economics: General‡ ; Price Level; Inflation; Deflation ; Demand for Money ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General
• Subject: money ; inflation ; overlapping generations ; unemployment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Huber, Samuel ; Kim, Jaehong ; Marchesiani, Alessandro
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/200187
• Last update: 10.03.2025, 11:41 AM CET