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Inertial inflation and Phillips curve

Author

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  • Luiz Carlos Bresser-Pereira
  • Yoshiaki Nakano

Abstract

This note introduces the problem of indexation of wages, exchange rate, andother prices in the Phillips’ curve. With this aim, we developed a simplified model of theinflationary process decomposing it in (1) inertial inflation; (2) the Phillips’ curve; (3) administeredor supply shock inflation. Using this model, first we show that a supply shock shiftsthe Phillips’ curve accelerating the trend rate of inertial inflation. Second, that a continuousdemand pressure through Phillips’ curve leads to continuous acceleration of the rate of inflation.And third, that a rise in the rate of unemployment may lead to an oligopolistic increasein the profit margin, which also leads a shift in the Phillips’ curve and an acceleration ofinflation. JEL Classification: E31; E24.

Suggested Citation

  • Luiz Carlos Bresser-Pereira & Yoshiaki Nakano, 1986. "Inertial inflation and Phillips curve," Brazilian Journal of Political Economy, Center of Political Economy, vol. 6(2), pages 237-243.
    • Handle: RePEc:ekm:repojs:v:6:y:1986:i:2:p:237-243:id:1793
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    Keywords

    Inflation; Phillips curve;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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