We investigate the link between inflation, growth and unemployment nesting a model of fair wages into one of endogenous growth of learning by doing and assuming that firms protect wages' purchasing power against inflation in exchange of worker's effort. Unemployment decreases with higher inflation and real growth rates. These effects tends to vanish as inflation and growth increase. Depending on the assumptions on learning-by-doing mechanisms, the effect of inflation on growth can be either nil or positive, but tiny. The Appendix shows that the short run effects of a monetary shocks mirror the long-run effects of inflation.
Inflation gifts and endogenous growth through learning-by-doing, WP Series University of Verona Department of Economics (ISSN 2036-2919), 9/2013
VAONA, Andrea
2013-01-01
Abstract
We investigate the link between inflation, growth and unemployment nesting a model of fair wages into one of endogenous growth of learning by doing and assuming that firms protect wages' purchasing power against inflation in exchange of worker's effort. Unemployment decreases with higher inflation and real growth rates. These effects tends to vanish as inflation and growth increase. Depending on the assumptions on learning-by-doing mechanisms, the effect of inflation on growth can be either nil or positive, but tiny. The Appendix shows that the short run effects of a monetary shocks mirror the long-run effects of inflation.
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