the unemployment, this paper tries to answer the following question: Is a nominal permanent disinflation compatible with … short-run unemployment costs but also with long-run output benefits? The answer to this question crucially depends on the …

-specific labour imply a sufficient degree of real rigidity, and so can reproduce inflation dynamics well. However, they imply too … little real rigidity and, so, too volatile inflation, owing to strong responses of marginal wages and hours per employee … the responses of wages, inflation and employment. …