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Customer Markets, Inflation and Unemployment in a Dynamic Model with a Range of Equilibria
Author(s) -
De Vincenti Claudio
Publication year - 2001
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/1467-999x.t01-1-00103
Subject(s) - nairu , economics , unemployment , inflation (cosmology) , phillips curve , macroeconomics , monetary policy , range (aeronautics) , full employment , keynesian economics , monetary economics , econometrics , physics , materials science , composite material , theoretical physics
The paper presents a dynamic model incorporating a range of non‐accelerating‐inflation rates of unemployment (NAIRU) obtained according to the theoretical framework proposed by the customer markets literature. The analysis of the dynamic adjustments of unemployment and inflation emphasizes the real effects of demand shocks. Changes in the fiscal and monetary policy can exert permanent effects on output and unemployment, both determining persistence in the unemployment rate and selecting the actual steady‐state equilibrium within the NAIRU range.