Logo
Munich Personal RePEc Archive

The microfoundations of the Keynesian wage-price spiral

Malikane, Christopher (2012): The microfoundations of the Keynesian wage-price spiral.

[thumbnail of MPRA_paper_42921.pdf]
Preview
PDF
MPRA_paper_42921.pdf

Download (162kB) | Preview

Abstract

We derive the backward-looking Keynesian wage-price spiral from micro-foundations. The optimal price Phillips curve features one lag of price inflation, the lag of the labour share, excess demand pressure, speed-limit effects and supply shocks. The wage Phillips curve features current and lagged price inflation, excess demand pressure up to the second lag, and the lag of nominal wage inflation. We estimate this model for six developed and emerging market economies and find that the model fits the data well. In general, nominal wages are more flexible than prices with respect to demand pressure. The baseline model rejects the inclusion of supply shocks and indexation of wages in developed economies and some emerging markets.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.