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Increasing returns to scale and the long-run Phillips curve

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  • Vaona, Andrea
  • Snower, Dennis

Abstract

A growing body of empirical evidence shows that there exists a long-run positive trade-off between inflation and real macroeconomic activity. Within a New Keynesian framework, we examine how increasing returns generate a positive long-run relation between inflation and output.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 100 (2008)
Issue (Month): 1 (July)
Pages: 83-86

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Handle: RePEc:eee:ecolet:v:100:y:2008:i:1:p:83-86

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  1. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2003. "The European Phillips Curve: Does the NAIRU Exist?," CEPR Discussion Papers 4102, C.E.P.R. Discussion Papers.
  2. Robert G. King & Alexander L. Wolman, 1996. "Inflation targeting in a St. Louis model of the 21st century," Review, Federal Reserve Bank of St. Louis, issue May, pages 83-107.
  3. Mark J. Roberts & Dylan Supina, 1997. "Output Price and Markup Dispersion in Micro Data: The Roles of Producer Heterogeneity and Noise," NBER Working Papers 6075, National Bureau of Economic Research, Inc.
  4. Ascari, Guido, 1998. "Superneutrality Of Money In Staggered Wage-Setting Models," Macroeconomic Dynamics, Cambridge University Press, vol. 2(03), pages 383-400, September.
  5. Graham, Liam & Snower, Dennis J., 2004. "The real effects of money growth in dynamic general equilibrium," Working Paper Series 0412, European Central Bank.
  6. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  7. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  8. N. Gregory Mankiw, 2000. "The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment," Harvard Institute of Economic Research Working Papers 1905, Harvard - Institute of Economic Research.
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  11. King, Robert G. & Watson, Mark W., 1994. "The post-war U.S. phillips curve: a revisionist econometric history," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 157-219, December.
  12. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2005. "A reappraisal of the inflation-unemployment tradeoff," European Journal of Political Economy, Elsevier, vol. 21(1), pages 1-32, March.
  13. Woodford, M., 1997. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Papers 632, Stockholm - International Economic Studies.
  14. Laurence M. Ball, 1997. "Disinflation and the NAIRU," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 167-194 National Bureau of Economic Research, Inc.
  15. Ascari, G., 1997. "Optimizing Agents, Staggered Wages and Persistence in the Real Effects of Money Shocks," The Warwick Economics Research Paper Series (TWERPS) 486, University of Warwick, Department of Economics.
  16. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
  17. Devereux, Michael B. & Yetman, James, 2002. "Menu costs and the long-run output-inflation trade-off," Economics Letters, Elsevier, vol. 76(1), pages 95-100, June.
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  19. Ramey, Valerie A, 1991. "Nonconvex Costs and the Behavior of Inventories," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 306-34, April.
  20. Mark J Roberts & Dylan Supina, 1997. "Output Price And Markup Dispersion In Micro Data: The Roles Of Producer And Heterogeneity And Noise," Working Papers 97-10, Center for Economic Studies, U.S. Census Bureau.
  21. Roger Betancourt & Margaret Malanoski, 1999. "An Estimable Model of Supermarket Behavior: Prices, Distribution Services and Some Effects of Competition," Empirica, Springer, vol. 26(1), pages 55-73, March.
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Citations

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Cited by:
  1. Ahrens, Steffen & Snower, Dennis J., 2012. "Envy, guilt, and the Phillips curve," Economics Working Papers 2012-01, Christian-Albrechts-University of Kiel, Department of Economics.
  2. Andrea Vaona, 2006. "Merging the Purchasing Power: Parity and the Phillips Curve Literatures: Regional Evidence from Italy," Kiel Working Papers 1282, Kiel Institute for the World Economy.
  3. Vaona, Andrea, 2013. "Money illusion and the long-run Phillips curve in staggered wage-setting models," Research in Economics, Elsevier, vol. 67(1), pages 88-99.
  4. Guido Ascari & Argia M. Sbordone, 2013. "The macroeconomics of trend inflation," Staff Reports 628, Federal Reserve Bank of New York.

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