J. Bradford DeLong
The Phillips curve is steep when so-called nominal rigidities in the economy are few and weak--and thus when prices respond quickly and substantially to changes in demand.
Nominal rigidities are weak when labor unions have few members, when long-term contracts contain many automatic price escalator clauses, when there are few long-term contracts, and when people expect inflation to be volatile and thus adjust their plans according to what changes in inflation they see.
When the Phillips curve is steep, even a small change in unemployment will have a large effect on the rate of inflation.
|The Phillips Curve Locating the Phillips Curve A Shallow Phillips Curve|
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