TY  - JOUR
AU  - Farmer,Roger E.A.
TI  - AIL Theory and the Ailing Phillips Curve:  A Contract Based Approach to Aggregate Supply
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3115
PY  - 1989
Y2  - September 1989
UR  - http://www.nber.org/papers/w3115
L1  - http://www.nber.org/papers/w3115.pdf
N1  - Author contact info:
Roger Farmer
UCLA
Department of Economics
Box 951477
Los Angeles, CA 90095-1477
Tel: 310/825-6547
Fax: 310/825-9528
E-Mail: rfarmer@econ.ucla.edu
M1  - published as Roger E. A. Farmer. "AIL Theory and the Ailing Phillips Curve: A Contract-Based Approach to Aggregate Supply," in R. Glenn Hubbard, editor, "Asymmetric Information, Corporate Finance, and Investment" University of Chicago Press, 1990 (1990)

AB  - This paper presents empirical evidence from U.S. data of a structurally stable aggregate supply relationship between real and nominal rates of interest and the rate of unemployment. The paper reviews theories of contracts that are based on the twin assumptions of asymmetric information and limited collateral and it argues that these theories (referred to as A.I.L. theories) provide a strong theoretical foundation for a contract-based theory of aggregate supply. It is suggested that the original Phillips curve estimates should be reinterpreted in the light of A.I.L. theories which represent alternatives to the Phelps-Friedman interpretation of the Phillips relationship. 
ER  -