Discussion paper

DP3691 The Return of the Long-Run Phillips Curve

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.


Snower, D and L Graham (eds) (2003), “DP3691 The Return of the Long-Run Phillips Curve”, CEPR Press Discussion Paper No. 3691. https://cepr.org/publications/dp3691