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The Return Of The Wage Phillips Curve

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  • Jordi Galí

Abstract

The standard New Keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment. Under some assumptions, that relation takes a form similar to that found in empirical applications--starting with the original Phillips (1958) curve--and may thus be viewed as providing some theoretical foundations to the latter. The structural wage equation derived here is shown to account reasonably well for the comovement of wage inflation and the unemployment rate in the U.S. economy, even under the strong assumption of a constant natural rate of unemployment.

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File URL: http://hdl.handle.net/10.1111/j.1542-4774.2011.01023.x
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Bibliographic Info

Article provided by European Economic Association in its journal Journal of the European Economic Association.

Volume (Year): 9 (2011)
Issue (Month): 3 (06)
Pages: 436-461

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Handle: RePEc:bla:jeurec:v:9:y:2011:i:3:p:436-461

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  4. Gordon, Robert J, 1996. "The Time-varying NAIRU and its Implications for Economic Policy," CEPR Discussion Papers 1492, C.E.P.R. Discussion Papers.
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  8. Hamid Mehran & Joseph Tracy, 2001. "The effect of employee stock options on the evolution of compensation in the 1990s," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 17-34.
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Cited by:
  1. Mohsen Bahmani-oskooee & Massoumeh Hajilee, 2011. "How Fast Wages Adjust to Prices: A Multi Country Analysis," Economics Bulletin, AccessEcon, vol. 31(3), pages 2404-2413.
  2. Roberto Bande & Marika Karanassou, 2010. "Spanish Regional Unemployment Revisited: The Role of Capital Accumulation," Working Papers 666, Queen Mary, University of London, School of Economics and Finance.
  3. Lawrence J. Christiano & Martin S. Eichenbaum & Mathias Trabandt, 2013. "Unemployment and Business Cycles," NBER Working Papers 19265, National Bureau of Economic Research, Inc.
  4. Michael Kiley, 2010. "Output gaps," 2010 Meeting Papers 266, Society for Economic Dynamics.
  5. Robert Ambrisko & Jan Babecky & Jakub Rysanek & Vilem Valenta, 2012. "Assessing the Impact of Fiscal Measures on the Czech Economy," Working Papers 2012/15, Czech National Bank, Research Department.
  6. Malikane, Christopher, 2012. "The microfoundations of the Keynesian wage-price spiral," MPRA Paper 42921, University Library of Munich, Germany, revised 29 Nov 2012.
  7. Quaas, Georg & Klein, Mathias, 2010. "Is the Phillips Curve of Germany Spurious?," MPRA Paper 26604, University Library of Munich, Germany.
  8. Massimiliano Marcellino & Yuliya Rychalovska, 2012. "An estimated DSGE model of a Small Open Economy within the Monetary Union: Forecasting and Structural Analysis," RSCAS Working Papers 2012/34, European University Institute.
  9. Rhee, Hyuk-jae & Turdaliev, Nurlan, 2013. "Optimal monetary policy in a small open economy with staggered wage and price contracts," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 306-323.
  10. Quaas, Georg & Klein, Mathias, 2010. "Der Beitrag alternativer NAIRU-Kurven zur Erklärung der Inflation
    [The Contribution of Alternative NAIRU-curves to the Explanation of Inflation]
    ," MPRA Paper 26176, University Library of Munich, Germany.
  11. Muto, Ichiro & Shintani, Kohei, 2014. "An Empirical Study on the New Keynesian Wage Phillips Curve: Japan and the US," MPRA Paper 53934, University Library of Munich, Germany.
  12. Barseghyan Gayane, 2013. "An Estimated Dynamic Stochastic General Equilibrium Model for Armenian Economy," EERC Working Paper Series 13/11e, EERC Research Network, Russia and CIS.

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