providing a unified theory to analyze labor and goods markets. Acknowledgments, machine-readable bibliographic record, mARC, RIS, BibTeX, document Object Identifier (DOI.3386/w13924. We study the long-run relation between money, measured by inflation or interest rates, and unemployment. For less conservative but still reasonable parameters, money accounts for almost all low-frequency movement in unemployment over the last half century. We first discuss data, documenting a strong positive relation between the variables at low frequencies. We calibrate the model, to ask how monetary factors account quantitatively for low-frequency labor market behavior.
13924, issued in April 2008, nBER Program(s Economic Fluctuations and Growth, Labor Studies, Monetary Economics. For conservative parameterizations, money accounts for some but not that much of trend unemployment - by one measure, about 1/5 of the increase during the stagflation episode of the 70s can be explained by monetary policy alone. Users who downloaded this paper also downloaded * these). Nber Working Paper. The answer depends on two key parameters: the elasticity of money demand, which translates monetary policy to real balances and profits; and the value of leisure, which affects the transmission from profits to entry and employment.