DP3691 The Return of the Long-Run Phillips Curve
|Author(s):||Liam Graham, Dennis J. Snower|
|Publication Date:||January 2003|
|Keyword(s):||forward-looking expectations, inflation, monetary policy, nominal inertia, Phillips Curve, unemployment|
|JEL(s):||E20, E30, E40, E50|
|Programme Areas:||Labour Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3691|
This paper integrate microfoundations of wage staggering into a simple dynamic general equilibrium model with rational expectations. In this context we show that a permanent increase in money growth leads to a permanent increase in the rate of inflation and a permanent reduction in the level of unemployment. In short, we derive a microfounded long-run downward-sloping Phillips curve.