Dual labor market and the "Phillips curve puzzle"

Hideaki Aoyama, Corrado Di Guilmi, Yoshi Fujiwara and Hiroshi Yoshikawa

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Low inflation was once a welcome to both policy makers and the public. However, Japan’s experience during the 1990’s changed the consensus view on price of economists and central banks around the world. Facing deflation and zero interest bound at the same time, Bank of Japan had difficulty in conducting effective monetary policy. It made Japan’s stagnation unusually prolonged. Too low inflation which annoys central banks today is translated into the “Phillips curve puzzle”. In the US and Japan, in the course of recovery from the Great Recession after the 2008 global financial crisis, the unemployment rate had steadily declined to the level which was commonly regarded as lower than the natural rate or NAIRU. And yet, inflation stayed low. In this paper, we consider a minimal model of dual labor market to jointly investigate how blue the different factors.

Keywords: Phillips curve; bargaining power; secondary workers (search for similar items in EconPapers)
JEL-codes: C60 E31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2021-06
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
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https://cama.crawford.anu.edu.au/sites/default/fil ... iwara_yoshikawa0.pdf (application/pdf)

Related works:
Working Paper: Dual Labor Market and the "Phillips Curve Puzzle" (2021)
Working Paper: Dual Labor Market and the "Phillips Curve Puzzle" (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-49

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