Nævdal, Eric; Wagner, Martin - Department of Economics and Finance Research and … - 2005
unemployment rate corresponding to the solution presented in Aghion and Blanchard is too low. Our solution is formally based on … and Blanchard (1994). Aghion and Blanchard only present an 'approximate' solution which entails a constant unemployment … rate in what they call a turnpike approximation. We show that optimal unemployment paths have two features. First …