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Nominal Income and the Inflation-Growth Divide
Author:
Sheetal K. Chand null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1997: Issue 147
Language:
English
Publication Date:
01 Nov 1997
DOI:
https://doi.org/10.5089/9781451856699.001
ISBN:
9781451856699
ISSN:
1018-5941
Pages:
32
Keywords:
WP; inflation rate; growth rate; Phillips curve; macroeconomic analysis; nominal income; inflation; output; G-7 countries; rate of inflation; growth solution; cross-equation restriction; inflation effect; income growth; growth equation; Production growth; Personal income; Wages; Potential output
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper deals with aggregate demand fluctuations and their price and output effects. Starting with a nominal income solution, a rule for determining the inflation and output growth effects is presented. Assigning alternative values to the key parameters of the suggested rule generates different closure rules, such as the classical and the Keynesian and their modern counterparts. An application to major industrial country data indicates that the suggested rule is robust. Both inflation and output growth are affected by nominal shocks, but response patterns vary among the countries.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund