Created 3/10/1998
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A Steep Phillips Curve

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  

Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax

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