Real wages, monetary accommodation, and inflation

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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.

Original languageEnglish
Pages (from-to)897-911
Number of pages15
JournalEuropean Economic Review
Issue number5
StatePublished - Jul 1990


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