THE PHILLIPS CURVE IN A MATCHING MODEL

Tai Wei Hu, Neil Wallace

Research output: Contribution to journalArticlepeer-review

Abstract

Following ideas in Hume, monetary shocks are embedded in the Lagos-Wright model in a new way: There are only nominal shocks accomplished by individual transfers that are sufficiently noisy so that realizations of those transfers do not permit the agents to deduce much about the aggregate realization. Assuming that the distribution of aggregate shocks is almost degenerate, aggregate output increases with the growth rate of the stock of money—our definition of the Phillips curve. This almost degeneracy assumption is far from being necessary; under some mild conditions, the Phillips curve result holds for a large class of distributions.

Original languageEnglish (US)
Pages (from-to)1469-1487
Number of pages19
JournalInternational Economic Review
Volume60
Issue number4
DOIs
StatePublished - Nov 1 2019

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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