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The Natural Rate of Unemployment in a Disequilibrium Model*

Published online by Cambridge University Press:  17 August 2016

R.W. Latham  and
D.A. Peel
R.W. Latham
Affiliation:
University of Liverpool
D.A. Peel
Affiliation:
University of Liverpool
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Extract

Seven years ago Friedman first argued that there is no long run trade-off between inflation and unemployment. Since then several authors have derived this result in a model which juxtaposes a neoclassical wage equation with a mark-ap price equation. The former is

where ŵ and are the percentage rates of change of money wage rates and expected prices respectively, D and S are the demand for and supply of labour, λ is a postive and constant speed of adjustment, and a is a constant which is equal to unity when there is no money illusion.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 43 , Issue 1 , March 1977 , pp. 53 - 65
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1977 

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Footnotes

*

The authors are grateful for the helpful comments of an anonymous referee.

References

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