Inflation, Unemployment, and Economic Growth in a Schumpeterian Economy*

Chu, Angus C ORCID: 0000-0002-7196-1277, Cozzi, Guido, Fan, Haichao and Furukawa, Yuichi (2021) Inflation, Unemployment, and Economic Growth in a Schumpeterian Economy* The Scandinavian Journal of Economics, 123 (3). pp. 874-909. ISSN 0347-0520, 1467-9442

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Abstract

AbstractIn this paper, we explore the relationship between inflation and unemployment in a monetary Schumpeterian growth model. Under the cash‐in‐advance (CIA) constraint on research and development (R&D), higher inflation reduces innovation and increases unemployment. Under the CIA constraint on consumption, higher inflation also reduces innovation but decreases unemployment instead. Therefore, the two CIA constraints imply drastically different relationships between inflation and unemployment. This theoretical result is consistent with our empirical finding, and it provides a plausible explanation for the mixed empirical results in the literature. Calibrating our model to aggregate data in the United States and the Eurozone, we also explore the relationship between inflation and unemployment quantitatively.

Item Type:	Article
Uncontrolled Keywords:	38 Economics, 3801 Applied Economics, 3802 Econometrics, 3803 Economic Theory, 8 Decent Work and Economic Growth
Depositing User:	Symplectic Admin
Date Deposited:	30 Mar 2020 11:08
Last Modified:	31 Jan 2026 14:21
DOI:	10.1111/sjoe.12416
Related Websites:	Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3080831
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