GROWTH, DISINFLATION AND DISTRIBUTION: ANOTHER IMPOSSIBLE TRINITY?
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Abstract
This paper builds a theoretical model that seeks to explore the disinflationary and distributional effects of economic growth. With no margin to fix the nominal exchange rate, and with a lack of credibility of the monetary authority, growth can be an alternative to disinflation if it is supported by productivity increases. Under not so particular conditions, associated with the value of employment-output and imports-output elasticities, not only is it not necessary to give up growth to reduce inflation, but it also allows reducing unit production costs through productivity increases. However, this growth-based strategy brings with it greater income inequality, and if wages are very sensitive to output growth it could be counterproductive to disinflation.
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