Downward nominal wage rigidities bend the phillips curve

Mary C. Daly, Bart Hobijn

Research output: Contribution to journalArticle

21 Scopus citations

Abstract

We introduce a model of monetary policy with downward nominal wage rigidities and show that both the slope and curvature of the Phillips curve depend on the level of inflation and the extent of downward nominal wage rigidities. This is true for the both the long-run and the short-run Phillips curve. Comparing simulation results from the model with data on U.S. wage patterns, we show that downward nominal wage rigidities likely have played a role in shaping the dynamics of unemployment and wage growth during the last three recessions and subsequent recoveries.

Original languageEnglish (US)
Pages (from-to)51-93
Number of pages43
JournalJournal of Money, Credit and Banking
Volume46
StatePublished - 2014
Externally publishedYes

Keywords

  • Downward nominal wage rigidities
  • Monetary policy
  • Phillips curve

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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