A Phillips curve with an Ss foundation

Mark Gertler, John Leahy

    Research output: Contribution to journalArticle

    Abstract

    We develop an analytically tractable Phillips curve based on state-dependent pricing. We consider a local approximation around a zero inflation steady state and introduce infrequent idiosyncratic shocks. The resulting Phillips curve is a simple variant of the conventional time-dependent Calvo formulation with important differences. First, the model is able to match the micro evidence on the magnitude and timing of price adjustments. Second, our state-dependent model exhibits greater flexibility in the aggregate price level than the time-dependent model. With real rigidities present, however, our model can exhibit nominal stickiness similar to a conventional time-dependent model.

    Original languageEnglish (US)
    Pages (from-to)533-572
    Number of pages40
    JournalJournal of Political Economy
    Volume116
    Issue number3
    DOIs
    StatePublished - Jun 2008

    Fingerprint

    Phillips curve
    Stickiness
    Price level
    Price adjustment
    Idiosyncratic shocks
    Real rigidities
    Inflation
    Approximation
    State-dependent pricing

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    A Phillips curve with an Ss foundation. / Gertler, Mark; Leahy, John.

    In: Journal of Political Economy, Vol. 116, No. 3, 06.2008, p. 533-572.

    Research output: Contribution to journalArticle

    Gertler, M & Leahy, J 2008, 'A Phillips curve with an Ss foundation', Journal of Political Economy, vol. 116, no. 3, pp. 533-572. https://doi.org/10.1086/589522
    Gertler, Mark ; Leahy, John. / A Phillips curve with an Ss foundation. In: Journal of Political Economy. 2008 ; Vol. 116, No. 3. pp. 533-572.
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