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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15758.

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Date of creation: Feb 2010
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Handle: RePEc:nbr:nberwo:15758

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Cited by:
  1. 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.
  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. Malikane, Christopher, 2012. "The Microfoundations of the Keynesian Wage-Price Spiral," MPRA Paper 42923, University Library of Munich, Germany, revised 2012.
  4. 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.
  5. Quaas, Georg & Klein, Mathias, 2010. "Is the Phillips Curve of Germany Spurious?," MPRA Paper 26604, University Library of Munich, Germany.
  6. 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.
  7. 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.

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