The Backward Bending Phillips Curves: A Simple Model
AbstractThis paper develops a simple macroeconomic model of the backward bending Phillips curve that allows easy comparison with the neo-Keynesian and new classical models of the Phillips curve. There are two separate explanations of the backward bending Phillips curve and the model incorporates both. One explanation focuses on near-rational inflation expectations and aggregation of expectations across workers. The other explanation focuses on nominal wage setting behavior and aggregation of nominal wage behavior across sectors. The paper concludes with some observations about the implications of the backward bending Phillips curve for monetary policy.
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Bibliographic InfoPaper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp168.
Date of creation: 2008
Date of revision:
Backward bending Phillips curve; minimum unemployment rate of inflation;
Find related papers by JEL classification:
- E00 - Macroeconomics and Monetary Economics - - General - - - General
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-10 (All new papers)
- NEP-CBA-2008-05-10 (Central Banking)
- NEP-MAC-2008-05-10 (Macroeconomics)
- NEP-PKE-2008-05-10 (Post Keynesian Economics)
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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- Thomas I. Palley, 2003. "The Backward--Bending Phillips Curve And The Minimum Unemployment Rate Of Inflation: Wage Adjustment With Opportunistic Firms," Manchester School, University of Manchester, vol. 71(1), pages 35-50, January.
- David Romer, 2000.
"Keynesian Macroeconomics without the LM Curve,"
NBER Working Papers
7461, National Bureau of Economic Research, Inc.
- 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.
- 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.
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