Resource title

Inflation and Unemployment: Lagos-Wright meets Mortensen-Pissarides

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Resource description

Inflation and unemployment are central issues in macroeconomics. While progress has been made on these issues recently using models that explicitly incorporate search-type frictions, existing models analyze either unemployment or inflation in isolation. We develop a framework to analyze unemployment and inflation together. This makes contributions to disparate literatures, and provides a unified model for theory, policy, and quantitative analysis. We discuss optimal fiscal and monetary policy. We calibrate the model, and discuss the extent to which it can account for salient aspects of a half century?s experience with inflation, unemployment, interest rates, and velocity. Depending on some details concerning how one calibrations certain parameters, the model can do a good job matching the data.

Resource author

Aleksander Berentsen, Guido Menzio, Randall D. Wright

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/17850

Resource license

Adapt according to the presented license agreement and reference the original author.