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A Phillips curve interpretation of error-correction models of the wage and price dynamics

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  • Søren H. Harck, Denmark
  • http://www.asb.dk/omos/institutter/departmentofeconomics/
This paper presents a model of employment, distribution and inflation in which a modern error correction specification of the nominal wage and price dynamics (referring to claims on income by workers and firms) occupies a prominent role. It is brought out, explicitly, how this rather typical error-correction setting, which actually seems to capture the wage and price dynamics of many large- scale econometric models quite well, is fully compatible with the notion of an old-fashioned Phillips curve with finite slope. It is shown how the steady-state impact of various shocks to the model can be profitably conceived of and interpreted in terms of (and to some extent even calculated by means of) this long-run Phillips curve.
Original languageEnglish
JournalCambridge Journal of Economics
Volume33
Issue1
Pages (from-to)95-112
Number of pages18
ISSN0309-166X
DOIs
Publication statusPublished - 2009

    Research areas

  • Employment, Wage share, Inflation, Phillips curve, Error correction

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