科学研究

Dr. Chao Gu is the Professor of Economics at University of Missouri. She obtained her PhD in Economics from Cornell University in 2007. Her research interests include macroeconomics, monetary economics, banking, and economic theory. She published papers in the top journals as Econometrica, Journal of Political Economy, Review of Economic Studies, International Economic Review, Journal of Monetary Economics, Journal of Economic Theory, Review of Economic Dynamics, etc.

We study the effects of the firm’s credit condition on labor market performance and the relationship between expected inflation and unemployment in a new monetarist model. Better credit condition has a positive impact on the labor market as firms save on financing cost, improve profitability, and create more vacancies. Inflation affects unemployment through two opposing channels. First, inflation increases the firm’s financing cost, which discourages job creation and increases unemployment. Second, inflation lowers wages because unemployed workers carry higher real balances and suffer more from inflation compared to employed workers. This encourages job creation. The overall effect of inflation on employment can be positive or negative and depends crucially on the firm’s credit condition. We calibrate the model to match U.S. data before the great recession. The calibrated model suggests a small welfare cost of inflation and a downward-sloping Phillips curve with a flexible wage setting. We find that the firm’s credit condition is as important as the nominal interest rate to understand the unemployment movement.