The Backward Bending Phillips Curves: A Simple Model

Thomas Palley

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: This paper develops a simple macroeconomic model of the backward bending Phillips curve that allows easy comparison with the neo-Keynesian and new classical models of the Phillips curve. There are two separate explanations of the backward bending Phillips curve and the model incorporates both. One explanation focuses on near-rational inflation expectations and aggregation of expectations across workers. The other explanation focuses on nominal wage setting behavior and aggregation of nominal wage behavior across sectors. The paper concludes with some observations about the implications of the backward bending Phillips curve for monetary policy.

Keywords: Backward bending Phillips curve; minimum unemployment rate of inflation (search for similar items in EconPapers)
JEL-codes: E00 E31 E52 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pke
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Citations: View citations in EconPapers (2)

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