The Return of the Long-Run Phillips Curve

Graham, Liam; Snower, Dennis J.

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The Return of the Long-Run Phillips Curve

10 Pages Posted: 21 Mar 2003

See all articles by Liam Graham

Liam Graham

University College London - Department of Economics

Dennis J. Snower

University of Kiel - Institute for World Economics (IfW); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

There are 2 versions of this paper

Date Written: January 2003

Abstract

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.

Keywords: Inflation, unemployment, Phillips curve, nominal inertia, monetary policy, forward-looking expectations

JEL Classification: E20, E30, E40, E50

Suggested Citation: Suggested Citation

Graham, Liam and Snower, Dennis J., The Return of the Long-Run Phillips Curve (January 2003). Available at SSRN: https://ssrn.com/abstract=389580