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Anatomy of the Phillips Curve: Micro Evidence and Macro Implications

Author

Listed:
  • Luca Gagliardone
  • Mark Gertler
  • Simone Lenzu
  • Joris Tielens

Abstract

We develop a bottom-up approach to estimate the slope of the primitive form of the New Keynesian Phillips curve, which features marginal cost as the real activity variable. Using quarterly micro data on prices, costs, and output, we estimate dynamic pass-through regressions that identify the slope as a function of primitive parameters. We find a high slope for the cost-based Phillips curve, which contrasts with the low estimates of the conventional output gap-based formulation found in the literature. We reconcile by showing that the output elasticity of marginal cost is low, at least during moderate inflation periods (e.g., pre-pandemic).

Suggested Citation

  • Luca Gagliardone & Mark Gertler & Simone Lenzu & Joris Tielens, 2023. "Anatomy of the Phillips Curve: Micro Evidence and Macro Implications," NBER Working Papers 31382, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31382
    Note: EFG ME
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    Cited by:

    1. Anis Foresto & Monique Reid & Jeffrey Rakgalakane, 2025. "State dependence of the Phillips curve what does this mean for monetary policy," Working Papers 11080, South African Reserve Bank.
    2. Sergio Lago Alves & Hashmat Khan, 2024. "Are New Keynesian Models Useful When Trend Inflation is Not Low?," Working Papers 24-08, Chair in macroeconomics and forecasting, University of Quebec in Montreal's School of Management, revised Aug 2024.
    3. Francesco Furlanetto & Antoine Lepetit, 2024. "The Slope of the Phillips Curve," Finance and Economics Discussion Series 2024-043, Board of Governors of the Federal Reserve System (U.S.).
    4. George‐Marios Angeletos & Chen Lian & Christian K. Wolf, 2024. "Can Deficits Finance Themselves?," Econometrica, Econometric Society, vol. 92(5), pages 1351-1390, September.
    5. Gobbi, Lucio & Mazzocchi, Ronny & Tamborini, Roberto, 2025. "Inflation shocks and the New Keynesian model: When should central banks fear inflation expectations?," The North American Journal of Economics and Finance, Elsevier, vol. 80(C).
    6. Ángelo Gutiérrez-Daza, 2024. "Business Cycles when Consumers Learn by Shopping," Working Papers 2024-12, Banco de México.
    7. Bardóczy, Bence & Sim, Jae & Tischbirek, Andreas, 2025. "The macroeconomic effects of excess savings," Journal of Monetary Economics, Elsevier, vol. 156(C).
    8. Hashmat Khan & Sergio Lago Alves, 2025. "Are New Keynesian Models Useful When Trend Inflation is Not Very Low?," Carleton Economic Papers 25-01, Carleton University, Department of Economics.
    9. Roberto Tamborini, 2024. "Inflation surprises in a New Keynesian economy with a “true” consumption function," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1192-1215, July.
    10. Bill Dupor & Marie Hogan & Jingchao Li, 2024. "A Decomposition of the Phillips Curve’s Flattening," Working Papers 2025-002, Federal Reserve Bank of St. Louis.
    11. Nickel, Christiane & Kilponen, Juha & Moral-Benito, Enrique & Koester, Gerrit & Ciccarelli, Matteo & Enders, Almira & Holton, Sarah & Landau, Bettina & Venditti, Fabrizio & Bobeica, Elena & Brand, Cla, 2025. "A strategic view on the economic and inflation environment in the euro area," Occasional Paper Series 371, European Central Bank.
    12. Engin Kara, 2025. "The Natural Rate of Inflation," CESifo Working Paper Series 12306, CESifo.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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