Working Paper

Return of the Long-Run Phillips Curve

Authors

  • Liam Graham
  • Dennis J. Snower
Publication Date

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.

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Info

JEL Classification
E20, E30, E40, E50

Key Words

  • Forward-looking expectations
  • Inflation
  • monetary policy
  • Nominal inertia
  • Phillips curve
  • Phillips-Kurve
  • unemployment