the economic dynamics of inflation and unemployment通货膨胀与失业的经济动力.pdfVIP

Theoretical Economics Letters, 2012, 2, 133-140 /10.4236/tel.2012.22025 Published Online May 2012 (http://www.SciRP.org/journal/tel) The Economic Dynamics of Inflation and Unemployment Tamara Todorova Department of Economics, American University in Bulgaria, Blagoevgrad, Bulgaria Email: ttodorova@aubg.bg Received November 18, 2011; revised December 21, 2011; accepted January 3, 2012 ABSTRACT We study the time path of inflation and unemployment using the Blanchard treatment of the relationship between the two and taking the monetary policy condition into account. We solve the model both in continuous and discrete time and compare the results. The economic dynamics of inflation and unemployment shows that they fluctuate around their intertemporal equilibria, inflation around the growth rate of nominal money supply, respectively, and unemployment around the natural rate of unemployment. However, while the continuous-time case shows uniform and smooth fluctua- tion for both economic variables, in discrete time their time path is explosive and nonoscillatory. The hysteresis case shows dynamic stability and convergence for inflation and unemployment to their intertemporal equilibria both in dis- crete and continuous time. When inflation affects unemployment adversely the time paths of the two, both in discrete and continuous time, are dynamically unstable. Keywords: Economic Dynamics; Second-Order Differential Equations; Second-Order Difference Equations; Phillips Curve; Inflation; Unemployment 1. Introduction alternative treatment of the relationship between inflation and unemployment. He incorporates in the model