Employment, Inflation and Income Distribution in an Open Economy. Pricing-to-market in a Modified NAIRU Model
The paper modifies a standard NAIRU model by implementing "pricing-to-market" as the basic assumption for the price setting behaviour of firms in an open economy. This entirely changes the outcomes of the model: First, inflation in equilibrium is stable at any rate of unemployment; the long-run Phil...| Link(s) zu Dokument(en): | WIFO Publikation |
|---|---|
| Veröffentlicht in: | WIFO Working Papers |
| 1. Verfasser: | |
| Format: | paper |
| Sprache: | Englisch |
| Veröffentlicht: |
2010
|
| Schlagworte: |
| Zusammenfassung: | The paper modifies a standard NAIRU model by implementing "pricing-to-market" as the basic assumption for the price setting behaviour of firms in an open economy. This entirely changes the outcomes of the model: First, inflation in equilibrium is stable at any rate of unemployment; the long-run Phillips curve is horizontal. Second, income distribution varies with the level of employment. Third, supplemented with a demand equation which allows for effects of both income distribution and international competitiveness, the NAIRU ceases to be a "strong attractor". These characteristics to a certain extent open up the space for expansive wage and demand policies. |
|---|---|
| Beschreibung: |
|