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Explaining Inflation and Unemployment

Author

Listed:
  • Farm, Ante

    (Swedish Institute for Social Research, Stockholm University)

Abstract

This paper explains inflation and unemployment starting from new baseline models of price formation and labor demand. Inflation is always and everywhere a pricing phenomenon. Unemployment is every year determined as a residual, as people in the labor force without employment. Employment is determined by production and labor productivity, while production is determined by spending (as measured by nominal GDP) at prices set by firms.

Suggested Citation

  • Farm, Ante, 2020. "Explaining Inflation and Unemployment," Working Paper Series 5/2020, Stockholm University, Swedish Institute for Social Research, revised 19 Sep 2020.
    • Handle: RePEc:hhs:sofiwp:2020_005
    as

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    File URL: http://www.diva-portal.org/smash/get/diva2:1435539/FULLTEXT02.pdf
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    References listed on IDEAS

    as
    1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    2. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    3. L. Randall Wray, 2024. "Modern Money Theory," Springer Books, Springer, edition 3, number 978-3-031-47884-0, June.
    4. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    5. Marc Lavoie, 2014. "Post-Keynesian Economics: New Foundations," Post-Print hal-01343652, HAL.
    6. Devine, Theresa J. & Kiefer, Nicolas M., 1991. "Empirical Labor Economics: The Search Approach," OUP Catalogue, Oxford University Press, number 9780195059366.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Inflation; employment; unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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