Capital Pledgeability, Inflation and Unemployment∗
نویسندگان
چکیده
We study the effects of firm’s credit condition on (1) labor market performance and (2) the inflation and unemployment relationship, in a new monetarist model. Better credit condition has positive impact on labor market as firms save on financing cost, improve profitability, and thus create more vacancies. Inflation increases the financing cost and thus discourages job creation. On the other hand, inflation lowers wage as employed workers carry a lower real balance compared to the unemployed ones. This encourages job creation. The overall effect depends crucially on the credit conditon. We show by examples that the Phillips curve can be upward or downward sloping, depending on the credit condition. JEL Classification Nos: E24, E31, E44, E51.
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