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New Keynesian Versus New Classical Theories of Aggregate Supply: Evidence from the Oecd Countries
Author(s) -
Madsen Jakob B.
Publication year - 1998
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/1467-9485.00096
Subject(s) - economics , aggregate supply , inflation (cosmology) , aggregate (composite) , wage , new keynesian economics , phillips curve , supply , econometrics , aggregate demand , aggregate data , price setting , keynesian economics , demand curve , function (biology) , macroeconomics , monetary policy , microeconomics , labour economics , medicine , physics , materials science , pathology , evolutionary biology , theoretical physics , composite material , biology
Using annual and quarterly data for the OECD countries this paper tests four theories of aggregate supply, namely the sticky wage, the sticky price, the worker misperception and the producer misinformation models. The empirical estimates suggest that the short run aggregate supply curve is positively sloped as a result of price and wage stickiness. Furthermore, the slope of the aggregate supply curve is found to be a positive function of the rate of inflation which is consistent with the sticky price model.