The return of the wage Phillips curve

Jordi Galí

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: The standard New Keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment. Under some assumptions, that relation takes a form similar to that found in empirical wage equations-starting from Phillips' (1958) original work-and may thus be viewed as providing some theoretical foundations to the latter. The structural wage equation derived here is shown to account reasonably well for the comovement of wage inflation and the unemployment rate in the U.S. economy, even under the strong assumption of a constant natural rate of unemployment.

Keywords: staggered nominal wage setting; New Keynesian model; unemployment fluctuations; empirical wage equations. (search for similar items in EconPapers)
JEL-codes: E24 E31 E32 (search for similar items in EconPapers)
Date: 2009-05, Revised 2010-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The Return of the Wage Phillips Curve (2015)
Journal Article: THE RETURN OF THE WAGE PHILLIPS CURVE (2011)
Working Paper: The Return of the Wage Phillips Curve (2010)
Working Paper: The Return of the Wage Phillips Curve (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1199

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