Increasing returns to scale and the long-run Phillips curve

Vaona, Andrea; Snower, Dennis J.

doi:10.1016/j.econlet.2007.11.013

Economics Letters

2008

DOI: 10.1016/j.econlet.2007.11.013

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Increasing returns to scale and the long-run Phillips curve

Andrea Vaona¹,

Dennis J. Snower

Abstract: Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in… Show more

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Cited by 6 publications

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References 23 publications

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“…The model of Graham and Snower () is extended in a number of different directions in Graham and Snower (), Vaona and Snower (, ), and Vaona ().…”

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confidence: 99%

The Most Beautiful Variations on Fair Wages and the Phillips Curve

Vaona¹

2013

J of Money Credit Banking

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This paper explores the connection between inflation and unemployment in two different models with fair wages in both the short and the long runs. Under customary assumptions regarding the sign of the parameters of the effort function, more inflation lowers the unemployment rate, albeit to a declining extent. This is because firms respond to inflation—which spurs effort by decreasing the reference wage—by increasing employment, thus maintaining the effort level constant as implied by the Solow condition. A stronger short‐run effect of inflation on unemployment is produced under varying as opposed to fixed capital, given that in the former case the boom produced by a monetary expansion is reinforced by an increase in investment. Therefore, I provide a new theoretical foundation for recent empirical contributions that find negative long‐ and short‐run effects of inflation on unemployment.

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“…The model of Graham and Snower () is extended in a number of different directions in Graham and Snower (), Vaona and Snower (, ), and Vaona ().…”

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confidence: 99%

The Most Beautiful Variations on Fair Wages and the Phillips Curve

Vaona¹

2013

J of Money Credit Banking

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Envy, guilt, and the Phillips curve

Ahrens

Snower

2014

Journal of Economic Behavior & Organization

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Money illusion and the long-run Phillips curve in staggered wage-setting models

Vaona

2013

Research in Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Money illusion and the long-run Phillips curve in staggered wage-setting models Andrea VaonaAbstract: We consider the effect of money illusion -defined referring to Stevens' ratio estimation function -on the long-run Phillips curve in an otherwise standard New Keynesian model of sticky wages. We show that if households under-perceive real economic variables, negative money non-superneutralities will become more severe. On the contrary, if households over-perceive real variables, positive money nonsuperneutralities will arise. We also provide a welfare analysis of our results and we show that they are robust to the inclusion of varying capital into the model. Firms' (over-)under-perception of the real prices of production inputs (strengthens) weakens negative money non-superneutralities. In an appendix, we investigate how money illusion affects the short-run effects of a monetary shock.Keywords: Phillips curve, inflation, nominal inertia, monetary policy, dynamic general equilibrium, money illusion, Stevens' ratio estimation function.JEL classification: E3, E20, E40, E50. Money illusion and the long-run Phillips curve in staggered wage-setting models Andrea Vaona AbstractWe consider the e¤ect of money illusion -de…ned referring to Stevens' ratio estimation function -on the long-run Phillips curve in an otherwise standard New Keynesian model of sticky wages. We show that if households under-perceive real economic variables, negative money non-superneutralities will become more severe. On the contrary, if households over-perceive real variables, positive money non-superneutralities will arise. We also provide a welfare analysis of our results and we show that they are robust to the inclusion of varying capital into the model. Firms'(over-)under-perception of the real prices of production inputs (strengthens) weakens negative money non-superneutralities. In an appendix, we investigate how money illusion a¤ects the short-run e¤ects of a monetary shock.

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Increasing returns to scale and the long-run Phillips curve

Cited by 6 publications

References 23 publications

The Most Beautiful Variations on Fair Wages and the Phillips Curve

The Most Beautiful Variations on Fair Wages and the Phillips Curve

Envy, guilt, and the Phillips curve

Money illusion and the long-run Phillips curve in staggered wage-setting models

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