A DISEQUILIBRIUM ANALYSIS OF MONETARY GROWTH AND INFLATION
1976 Volume 27 Issue 1 Pages 24-33
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1976 Volume 27 Issue 1 Pages 24-33
In this paper, we are concerned, using a monetary growth model, with the behavior of the labor market and of the rate of change of the price level, paying regard to the interdependence among the three markets, i. e., those for commodity, money and labor.
The rate of change of the price level and that of the money wage rate are assumed to depend respectively on the excess demand for commodity and that for labor.
Following conclusions have been obtained.
The ratio of the demand for and the supply of labor in the long-run depends mainly on the rate of growth of money supply, the parameters in the labor market such as the adjustment speed of the money wage change to the excess demand for labor, and the supply function of labor. Unless the rate of change of real wage rate is independent of price variations, appropriate monetary policies are able to reduce excess demand (or excess supply) in the labor market, which accompany variations in the rate of inflation and the rate of growth of real output.
