Real Wages, Monetary Accommodation, and Inflation

26 Pages Posted: 18 Apr 2007 Last revised: 9 Aug 2010

See all articles by Elhanan Helpman

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Leonardo Leiderman

affiliation not provided to SSRN

Date Written: October 1989

Abstract

We analyze the dynamics of inflation in an economy characterized by a forward-looking, staggered, price and wage determination process, and by monetary accommodation. In our model, inflation reconciles the conflicting claims of workers and firms. The model is capable of generating a positive association between real wages and inflation, of the type that has been observed in some high-inflation countries. It generates a price-wage spiral but does not result in inflationary inertia.

Suggested Citation

Helpman, Elhanan and Leiderman, Leonardo, Real Wages, Monetary Accommodation, and Inflation (October 1989). NBER Working Paper No. w3146. Available at SSRN: https://ssrn.com/abstract=980447

Elhanan Helpman (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-4690 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Leonardo Leiderman

affiliation not provided to SSRN

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