The real effects of money growth in dynamic general equilibrium

We analyse the effects of money growth within a standard New Keynesian framework and show that the interaction between staggered nominal contracts and money growth leads to a long-run trade-off between output and money growth. We explore the microeconomic mechanisms that lead to this trade-off, and show that it remains even when the contract length is endogenised. JEL Classification: E20, E40, E50inflation, nominal inertia, Phillips curve, Unemployment