This model has undergone many iterations over the last two years, so I'm very happy to have it finally out in the world. This final version is actually the simplest, and so may prove useful not just for further research but also for teaching. Feedback is very welcome! n/n

Without introducing a greater number of parameters, this parsimonious model can explain:

*How wage/price inflation curves are explicitly derived

*How indexation (& real wage resistance more broadly) can be modelled alongside expectations

*How stable inflation morphs into explosive episodes 6/n

Key result: Stability holds only when workers' barrier wage remains below that of firms. When these collide—especially in the face of runaway exchange rate depreciation from a balance-of-payments crisis—hyperinflation emerges, matching real-world stylised facts of hyperinflation 5/n

As inflation & aspiration gaps rise, the conflict between wage claims and price setting accelerates, as workers & firms place greater weight on their inflation expectations. This comes to a head at the 'barrier wages'—critical real wages defining the outer limits of stable inflationary outcomes 4/n

My model starts from explicit foundations for wage & price setting, showing that inflation expectations multiply rather than simply add to workers’ and firms’ aspiration gaps. The result? A nonlinear wage/price dynamic, with boundary behaviours absent from the textbook linear models 3/n

Is conflict inflation inherently stable—or prone to explosion? Prevailing models often pick a side:

BSL (Blecker-Setterfield-Lavoie): Inflation stability via incomplete indexation.

HS (Hein-Stockhammer): Instability via fully adaptive expectations.

But reality does not fit this neat dichotomy 2/n