Working Paper

Long-Run Inflation-Unemployment Dynamics: The Spanish Phillips Curve and Economic Policy


  • Karanassou
  • M.
  • Sala
  • H.
  • Snower
  • D.J.
Publication Date

This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call “frictional growth,” i.e. the interaction between money growth and nominal frictions. After presenting a theoretical model of this phenomenon, we construct an empirical model of the Spanish economy and, in this context, we evaluate the long-run inflation-unemployment tradeoff for Spain and examine how recent policy changes have affected it.

Kiel Institute Expert


JEL Classification
E2, E3, E4, E5, J3

Key Words

  • Forward-looking expectations
  • Inflation-unemployment Tradeoff
  • monetary policy
  • Nominal inertia
  • Phillips curve
  • Phillips-Kurve
  • staggered wage contracts