implications for the unemployment-inflation tradeoff and for the conduct of monetary policy.We proceed in two steps. We first leave … firms. We derive the relation between inflation and unemployment and discuss how it is influenced by the presence of labor … market frictions and real wage rigidities. We show the nature of the tradeoff between inflation and unemployment …

upward, at low inflation. Second, a closed-form solution for a long run Phillips curve relates average unemployment to … important role in shaping the trade-off. Fourth, when inflation decreases, volatility of unemployment increases whereas the … volatility of inflation decreases: this implies a long-run trade-off also between the volatility of unemployment and that of wage …