literature, cannot explain the persistence observed in actual inflation. We argue that one of the more prominent alternative … generates inflation persistence, but this is a consequence of their assuming that workers care about the past real wages of … obtains the standard formulation with no inflation persistence. …

try to prevent a cut in nominal wages. If inflation is so low that some nominal wages have to be cut, the strategic … advantage of the workers' induces higher unemployment in equilibrium. The upshot is a long run tradeoff between inflation and … unemployment for low levels of inflation. The prediction that low inflation involves higher unemployment in Europe but not in the …