Hostname: page-component-76fb5796d-x4r87 Total loading time: 0 Render date: 2024-04-26T01:59:14.519Z Has data issue: false hasContentIssue false
  • English
  • Français

INFLATION AND UNEMPLOYMENT IN COMPETITIVE SEARCH EQUILIBRIUM

Published online by Cambridge University Press:  14 December 2011

Mei Dong
Mei Dong*
Affiliation:
Bank of Canada
*
Address correspondence to: Mei Dong, Currency Department, the Bank of Canada, 234 Wellington Street, Ottawa, ON, K1A 0G9, Canada; e-mail: meidong@bankofcanada.ca.
Get access Rights & Permissions [Opens in a new window]

Abstract

Rocheteau, Rupert, and Wright [Scandinavian Journal of Economics 109 (2007), 837–855] show that the relationship between inflation and unemployment can be positive or negative, depending on the primitives of the model. The key features are indivisible labor, nonseparable preferences, and bargaining. Their results are derived only for a special case of bargaining, take-it-or-leave-it offer by buyers. Instead of bargaining, this paper considers competitive search. I show that the results of Rocheteau et al. can be generalized to an environment where both buyers and sellers have nonseparable preferences. In addition, the relationship between inflation and unemployment is robust to allowing free entry by sellers, which cannot be studied in Rocheteau et al. (2007).

Keywords

InflationUnemploymentCompetitive Search
Type
Articles
Information
Macroeconomic Dynamics , Volume 15 , Supplement S2: Money, Credit, and Liquidity: Part 2 , September 2011 , pp. 252 - 268
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, Daron and Shimer, Robert (1999) Holdups and efficiency with search frictions. International Economic Review 40 (4), 827–849.CrossRefGoogle Scholar
Berentsen, Aleksander, Menzio, Guido, and Wright, Randall (2011) Inflation and unemployment in the long run. American Economic Review 101 (1), 371–398.CrossRefGoogle Scholar
Burdett, Ken, Shi, Shouyong, and Wright, Randall (2001) Pricing and matching with frictions. Journal of Political Economy 109 (5), 1060–1085.CrossRefGoogle Scholar
Cooley, Thomas F. and Hansen, Gary D. (1989) The inflation tax in a real business cycle model. American Economic Review 79 (4), 733–748.Google Scholar
Dong, Mei (2010) Inflation and variety. International Economic Review 51 (2), 401–420.CrossRefGoogle Scholar
Faig, Miguel and Huangfu, Xiuhua (2007) Competitive search equilibrium in monetary economies. Journal of Economic Theory 127 (1), 709–718.CrossRefGoogle Scholar
Kocherlakota, Narayana (1998) Money is memory. Journal of Economic Theory 81 (2), 232–251.CrossRefGoogle Scholar
Lagos, Ricardo and Rocheteau, Guillaume (2005) Inflation, output, and welfare. International Economic Review 46 (2), 495–522.CrossRefGoogle Scholar
Lagos, Ricardo and Wright, Randall (2005) A unified framework for monetary theory and policy analysis. Journal of Political Economy 113 (3), 463–484.CrossRefGoogle Scholar
Liu, Qian (2009) Inflation and Unemployment: The Roles of Goods and Labor Markets Institutions. Working paper, Queen's University.Google Scholar
Moen, Espen (1997) Competitive search equilibrium. Journal of Political Economy 105 (2), 385–411.CrossRefGoogle Scholar
Rocheteau, Guillaume, Rupert, Peter, Shell, Karl, and Wright, Randall (2008) General equilibrium with nonconvexities and money. Journal of Economic Theory 142 (1), 294–317.CrossRefGoogle Scholar
Rocheteau, Guillaume, Rupert, Peter, and Wright, Randall (2007) Inflation and unemployment in general equilibrium. Scandinavian Journal of Economics 109 (4), 837–855.CrossRefGoogle Scholar
Rocheteau, Guillaume and Wright, Randall (2005) Money in search equilibrium, in competitive equilibrium and in competitive search equilibrium. Econometrica 73 (1), 175–202.CrossRefGoogle Scholar
Rogerson, Richard (1988) Indivisible labor, lotteries and equilibrium. Journal of Monetary Economics 21 (1), 3–16.CrossRefGoogle Scholar