Model of the Phillips curve based on adverse selection, a Public Deposited

Creator Series Issue number
  • 230
Date Created
  • 1983-06
Abstract
  • An overlapping generations model is developed that contains labor markets in which adverse selection problems arise. As a response to these problems, quantity rationing of labor occurs. In addition, the model is capable of generating (a) random employment and prices despite the absence of underlying uncertainty in equilibrium; (b) a statistical (nondegenerate) Phillips curve; (c) procyclical movements in productivity; (d) correlations between aggregate demand and unemployment (and output); (e) an absence of correlation between unemployment (employment) and real wages. In addition, the Phillips curve obtained typically has the "correct" slope. Finally, the model reconciles the theoretical importance and observed unimportance of intertemporal substitution effects, and explains why price level stability may be a poor policy objective.

Subject (JEL) Mot-clé Contributeurs Date Modified
  • 03/15/2018
Publisher
  • Federal Reserve Bank of Minneapolis. Research Division.
Resource type

Des relations

Dernière modification

Contenu téléchargeable

Télécharger le fichier PDF

Zipped Files

Download a zip file that contains all the files in this work.

Articles