Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/105880 
Year of Publication: 
2006
Series/Report no.: 
IMK Working Paper No. 4/2006
Publisher: 
Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK), Düsseldorf
Abstract: 
The authors of this paper formulate a disequilibrium AS-AD model based on sticky wages and prices, perfect foresight of current inflation rates and adaptive expectations concerning the inflation climate in which the economy operates. The model consists of a wage and a price Phillips curves, a dynamic IS curve as well as a dynamic employment adjustment equation and a Taylor-rule-type interest rate law of motion. Through instrumental variables GMM system estimation with aggregate time series data for the U.S. and the euro area economies, the authors obtain structural parameter estimates which support the specification of their theoretical model and show the importance of the inflationary climate, as well as of the Blanchard-Katz error correction terms, and indirectly of income distribution, in the dynamics of wage and price inflation in the U.S. and the euro area economies.
Subjects: 
AS-AD disequilibrium
wage and price Phillips curves
real wage adjustment
JEL: 
E24
E31
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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