• Economics
  • Published 2008

Sticky Prices, Sticky Wages, and Also Unemployment

  title={Sticky Prices, Sticky Wages, and Also Unemployment},
  author={Miguel Casares Polo},
This paper shows a New Keynesian model where wages are set at the value that matches household?s labor supply with firm?s labor demand. Subsequently, wage stickiness brings industry-level unemployment fluctuations. After aggregation, the rate of wage in?ation is negatively related to unemployment, as in the original Phillips (1958) curve, with an additional term that provides forward-looking dynamics. The supply-side of the model can be captured with dynamic expressions equivalent to those… CONTINUE READING


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