Working Paper

Return of the Long-Run Phillips Curve


  • Graham
  • L.
  • Snower
  • D.J.
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.

Kiel Institute Expert


JEL Classification
E20, E30, E40, E50

Key Words

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