Credit conditions, inflation, and unemployment

• 成果类型: Article
• 署名作者: Gu, Chao; Jiang, Janet Hua; Wang, Liang
• 署名单位: University of Missouri System; University of Missouri Columbia; Bank of Canada; University of Hawaii System
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2025.106081
• 发表日期: 2025
• 关键词: Credit conditions; inflation; liquidity; money; Phillips curve; unemployment

摘要

We construct a New Monetarist model with labor market search and identify two channels that affect the long-run relationship between inflation and unemployment. First, inflation lowers wages through bargaining because unemployed workers rely more heavily on cash transactions and suffer more from inflation than employed workers; this wage-bargaining channel generates a downward-sloping Phillips curve without assuming nominal rigidity. Second, inflation increases firms' financing costs, which discourages job creation and increases unemployment; this cash-financing channel leads to an upward-sloping Phillips curve. We calibrate our model to the U.S. economy. The improvement in firm financing conditions can explain the observation that the slope of the long-run Phillips curve has switched from positive to negative post-2000.