Has the U.S. Wage Phillips Curve Flattened? A Semi-Structural Exploration

Jordi Galí and Luca Gambetti

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: Unconditional reduced form estimates of a conventional wage Phillips curve for the U.S. economy point to a decline in its slope coefficient in recent years, as well as a shrinking role of lagged price inflation in the determination of wage inflation. We provide estimates of a conditional wage Phillips curve, based on a structural decomposition of wage, price and unemployment data generated by a VAR with time varying coefficients, identified by a combination of long-run and sign restrictions. Our estimates show that the key qualitative findings from the unconditional reduced form regressions also emerge in the conditional evidence, suggesting that they are not entirely driven by endogeneity problems or possible changes over time in the importance of wage markup shocks. The conditional evidence, however, suggests that actual changes in the slope of the wage Phillips curve may not have been as large as implied by the unconditional estimates.

Date: 2019-10
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (21)

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Working Paper: Has the U.S. Wage Phillips Curve Flattened? A Semi-Structural Exploration (2019)
Working Paper: Has the U.S. Wage Phillips Curve Flattened? A Semi-Structural Exploration (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:846

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