Vol. 6 No. 2 (1986)
How to Cite
Inertial inflation and Phillips curve
Abstract
This note introduces the problem of indexation of wages, exchange rate, and
other prices in the Phillips’ curve. With this aim, we developed a simplified model of the
inflationary process decomposing it in (1) inertial inflation; (2) the Phillips’ curve; (3) administered
or supply shock inflation. Using this model, first we show that a supply shock shifts
the Phillips’ curve accelerating the trend rate of inertial inflation. Second, that a continuous
demand pressure through Phillips’ curve leads to continuous acceleration of the rate of inflation.
And third, that a rise in the rate of unemployment may lead to an oligopolistic increase
in the profit margin, which also leads a shift in the Phillips’ curve and an acceleration of
inflation.
JEL Classification: E31; E24.
Keywords: Inflation Phillips curve