Using a standard dynamic general equilibrium model, we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long-run effects on real variables.

This paper argues that there is a nonzero inflation-unemployment tradeoff in the long-run due to frictional growth, a phenomenon that encapsulates the interplay of nominal staggering and money growth. The existence of a downward-sloping long-run Phillips curve suggests the development of a...