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Disequilibrium Macroeconomic Dynamics, Income Distribution and Wage-Price Phillips Curves

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Author Info
Ekkehard Ernst () (OECD)
Peter Flaschel () (University of Bielefeld)
Christian Proano () (University of Bielefeld, IMK at the Hans Boeckler Foundation)
Willi Semmler () (New School for Social Research, New York)

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Abstract

The authors of this paper formulate a disequilibrium AS-AD model based on sticky wages and prices, perfect foresight of current inflation rates and adaptive expectations concerning the inflation climate in which the economy operates. The model consists of a wage and a price Phillips curves, a dynamic IS curve as well as a dynamic employment adjustment equation and a Taylor-rule-type interest rate law of motion. Through instrumental variables GMM system estimation with aggregate time series data for the U.S. and the euro area economies, the authors obtain structural parameter estimates which support the specification of their theoretical model and show the importance of the inflationary climate, as well as of the Blanchard-Katz error correction terms, and indirectly of income distribution, in the dynamics of wage and price inflation in the U.S. and the euro area economies.

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Publisher Info
Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 04-2006.

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Length: 29 pages
Date of creation: Mar 2006
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Handle: RePEc:imk:wpaper:04-2006

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Related research
Keywords: AS-AD disequilibrium; wage and price Phillips curves; real wage adjustment;

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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  19. Chiarella, Carl & Flaschel, Peter & Wells, Graeme, 2003. "The Dynamics Of Keynesian Monetary Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 7(03), pages 473-475, June. [Downloadable!]
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  24. Ray C. Fair, 2000. "Testing the NAIRU Model for the United States," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 64-71, February. [Downloadable!] (restricted)
  25. Gerlach, Stefan & Schnabel, Gert, 2000. "The Taylor rule and interest rates in the EMU area," Economics Letters, Elsevier, vol. 67(2), pages 165-171, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christian Proaño Acosta, 2007. "Inflation Differentials and Business Cycle Fluctuations in the European Monetary Union," IMK Working Paper 05-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute. [Downloadable!]
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