NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Return of the Wage Phillips Curve

Jordi Galí

NBER Working Paper No. 15758
Issued in February 2010
NBER Program(s):   EFG   ME

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 applications-starting with the original Phillips (1958) curve-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.

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Document Object Identifier (DOI): 10.3386/w15758

Published: Jordi Galí, 2011. "The Return Of The Wage Phillips Curve," Journal of the European Economic Association, John Wiley & Sons, Ltd., vol. 9(3), pages 436-461, 06. citation courtesy of

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