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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.
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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

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References

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