Microeconomic foundation of the Phillips curve

Yasuhito Tanaka

MPRA Paper from University Library of Munich, Germany

Abstract: We show the negative relation between the unemployment rate and the inflation rate, that is, the Phillips curve using an overlapping generations model under monopolistic competition. We consider the effects of exogeneous changes in labor productivity. An increase (decrease) in the labor productivity in a period induces a decrease (increase) in the employment, an increase (decrease) in the unemployment rate and a falling (rising) in the price of the goods in the same period. Then, given the price in the previous period the inflation rate falls (rises). This conclusion is based on the premise of utility maximization of consumers and profit maximization of firms. Therefore, we have presented a microeconomic foundation of the Phillips curve.

Keywords: Phillips Curve; Microeconomic foundation; Overlapping generations model; Monopolistic competition. (search for similar items in EconPapers)
JEL-codes: E12 E24 E31 (search for similar items in EconPapers)
Date: 2020-10-10
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/103416/1/MPRA_paper_103416.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:103416

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().