A.I.L. Theory and the Ailing PHillips Curve: A Contract Based Approach to Aggregate Supply
AbstractThis paper presents empirical evidence from U.S. data of a structurally stable aggregate supply relationship between real and nominal rates of interest and the rate of unemployment. The paper reviews theories of contracts that are based on the twin assumptions of asymmetric information and limited collateral and it argues that these theories (referred to as A.I.L. theories) provide a strong theoretical foundation for a contract-based theory of aggregate supply. It is suggested that the original Phillips curve estimates should be reinterpreted in the light of A.I.L. theories which represent alternatives to the Phelps-Friedman interpretation of the Phillips relationship.
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Bibliographic InfoPaper provided by UCLA Department of Economics in its series UCLA Economics Working Papers with number 549.
Date of creation: 01 Mar 1989
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Web page: http://www.econ.ucla.edu/
Other versions of this item:
- Roger E.A. Farmer, 1989. "AIL theory and the ailing Phillips curve: a contract based approach to aggregate supply," Proceedings, Federal Reserve Bank of San Francisco.
- Roger E. A. Farmer, 1990. "AIL Theory and the Ailing Phillips Curve: A Contract-Based Approach to Aggregate Supply," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 207-230 National Bureau of Economic Research, Inc.
- Roger E.A. Farmer, 1989. "AIL Theory and the Ailing Phillips Curve: A Contract Based Approach to Aggregate Supply," NBER Working Papers 3115, National Bureau of Economic Research, Inc.
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