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THE PHILLIPS CURVE IN A MATCHING MODEL
Author(s) -
Hu TaiWei,
Wallace Neil
Publication year - 2019
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12393
Subject(s) - phillips curve , economics , realization (probability) , wright , aggregate (composite) , econometrics , stock (firearms) , degenerate energy levels , matching (statistics) , mathematical economics , keynesian economics , mathematics , monetary policy , computer science , physics , statistics , mechanical engineering , materials science , quantum mechanics , engineering , composite material , programming language
Following ideas in Hume, monetary shocks are embedded in the Lagos‐Wright model in a new way: There are only nominal shocks accomplished by individual transfers that are sufficiently noisy so that realizations of those transfers do not permit the agents to deduce much about the aggregate realization. Assuming that the distribution of aggregate shocks is almost degenerate, aggregate output increases with the growth rate of the stock of money—our definition of the Phillips curve. This almost degeneracy assumption is far from being necessary; under some mild conditions, the Phillips curve result holds for a large class of distributions.