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Office of Survey Methods Research
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Published Year: 2000
Survey/Program(s): Office of Employment and Unemployment Statistics
Catalog: Economic Working Paper
WP Number: WP-328
Publication Status / Disposition: Available from the Office of Employment and Unemployment Statistics (May 2000).
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Inflation and Establishment Turnover
Abstract
We study a channel through which inflation can have effects on the real economy. Using job creation and destruction data from U.S. manufacturing establishments from 1973-1988, we show that both jobs created by new establishments and jobs destroyed by dying establishments are negatively correlated with inflation. These results are robust to controls for the real-business cycle and monetary policy. Over a longer time frame, data on business failures confirm our results obtained from job creation and destruction data. We show that a financial-markets explanation and a nominal-wage rigidities explanation are both consistent with our empirical evidence.
Keywords: Inflation, Job Creation and Destruction, Turnover.
JEL-codes: E31, J63, E32, E24