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Full-Text Articles in Social and Behavioral Sciences
The Return Of The Long-Run Phillips Curve, Liam Graham, Dennis Snower
The Return Of The Long-Run Phillips Curve, Liam Graham, Dennis Snower
Dennis Snower
This paper shows that the interaction between money growth and staggered nominal contracts gives rise to a long-run inflation-unemployment tradeoff.
An Anatomy Of The Phillips Curve, Marika Karanassou, Hector Sala, Dennis Snower
An Anatomy Of The Phillips Curve, Marika Karanassou, Hector Sala, Dennis Snower
Dennis Snower
The paper examines how the long-run inflation-unemployment tradeoff depends on the degree to which wage-price decisions are backward- versus forward-looking. When economic agents, facing time-contingent, staggered nominal contracts, have a positive rate of time preference, the current wage and price levels depend more heavily on past variables (e.g. past wages and prices) than on future variables. Consequently, the long-run Phillips curve becomes downward-sloping and, indeed, quit flat for plausible parameter values. This paper provides an intuitive account of how this long-run Phillips curve arises.