The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment (2000)
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BibTeX
@MISC{Mankiw00theinexorable,
author = {N. Gregory Mankiw},
title = { The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment},
year = {2000}
}
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Abstract
This paper discusses the short-mn tradeoffbetween inflation and unemployment. Although this tradeoff remains a necessary building block of business cycle theory, economists have yet to provide a completely satisfactory explanation for it. According to the consensus view among central bankers and monetary economists, a contractionary monetary shock raises unemployment, at least temporarily, and leads to a delayed and gradual fall in inflation. Standard dynamic models of price adjustment, however, carmot explain this pattern of responses. Reconciling the consensus view about the effects of monetary policy with models of price adjustment remains an outstanding puzzle for business cycle theorists.
