Rogerson (1988).

We combine two setups: Bewley-Huggett-Aiyagari and Mortensen-Pissarides. Wages are given by wage bargaining, and wages will depend positively on wealth since rich workers have a better outside option. We also study the model with aggregate risk.

Inflation and unemployment are central issues in macroeconomics. While much progress has been made on these issues by incorporating frictions using search theory, existing models analyze either unemployment or inflation. We develop a framework to analyze unemployment and inflation together. This...