Created 3/10/1998
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A Shallow Phillips Curve

J. Bradford DeLong

The Phillips curve is shallow when so-called nominal rigidities in the economy are common and strong --and thus when prices respond slowly and sluggishly to changes in demand.

Nominal rigidities are strong when labor unions have many members, when long-term contracts contain few automatic price escalator clauses, when there are many long-term contracts, and when people expect inflation to be constant and thus do not look for changes in inflation.

When the Phillips curve is shallow, even a large change in unemployment will have only a small effect on the rate of inflation.

The Phillips Curve    Locating the Phillips Curve    A Steep 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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