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Real Wage Rigidity andthe New Phillips Curve: the Brazilian Case

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  • Antonio Alberto Mazali
  • José Angelo Divino

Abstract

The new Keynesian Phillips curve has been criticized for not explaining the short-run inflation-output gap trade-off. Blanchard and Galí (2007) introduced real wage rigidity and derived a trade-off between stabilizing inflation and the gap between actual and efficient output. This paper estimates the new Phillips curve for the Brazilian economy, computes short-run trade-off, analyzes real wage rigidity, and tests theoretical restrictions imposed by the model. The GMM estimations fit the data very well and all theoretical restrictions are satisfied. There is strong real wage rigidity and a high output-gap cost to stabilize inflation in the short run.
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  • Antonio Alberto Mazali & José Angelo Divino, 2011. "Real Wage Rigidity andthe New Phillips Curve: the Brazilian Case," Anais do XXXVII Encontro Nacional de Economia [Proceedings of the 37th Brazilian Economics Meeting] 38, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    • Handle: RePEc:anp:en2009:38
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    Cited by:

    1. Kushal Banik Chowdhury & Nityananda Sarkar, 2017. "Is the Hybrid New Keynesian Phillips Curve Stable? Evidence from Some Emerging Economies," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(3), pages 427-449, September.
    2. Valdivia, Daney, 2015. "Handbook on DSGE models: some useful tips in modeling a DSGE models," MPRA Paper 61347, University Library of Munich, Germany.
    3. Adolfo Sachsida & Marcio Ribeiro & Claudio Hamilton dos Santos, 2009. "A Curva de Phillips e a Experiência Brasileira," Discussion Papers 1429, Instituto de Pesquisa Econômica Aplicada - IPEA.
    4. Alexis Maka & Fernando De Holanda Barbosa, 2014. "Phillips Curves: An Encompassing Test," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 061, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Giray Gozgor, 2013. "The New Keynesian Phillips Curve in an Inflation Targeting Country: The Case of Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 6(1), pages 7-18, April.
    6. Castelar, Ivan & Arruda, Elano Ferreira & Oliveira de Olivindo, Maria Thalita Arruda, 2018. "Business cycles, expectations and inflation in Brazil: a New-Keynesian Phillips curve analysis," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    7. Mário Jorge Mendonça & Adolfo Sachsida, 2012. "Inflação Versus Desemprego: Novas Evidências Para o Brasil," Discussion Papers 1763, Instituto de Pesquisa Econômica Aplicada - IPEA.
    8. Sachsida, Adolfo, 2013. "Inflação, Desemprego e Choques Cambiais: Uma Revisão da Literatura sobre a Curva de Phillips no Brasil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(4), November.
    9. Alexandre Rands Barros, 2012. "Stabilization Policies and Regional Development in Brazil," Chapters, in: Werner Baer (ed.), The Regional Impact of National Policies, chapter 9, Edward Elgar Publishing.
    10. Valdivia, Daney & Pérez, Danyira, 2013. "Dinámica económica y coordinación de políticas fiscal – monetaria en América Latina: Evaluación a través de una DSGE [Dynamic economic and coordination on fiscal – monetary policies in Latin Améric," MPRA Paper 51562, University Library of Munich, Germany.
    11. Ferreira, Diego & Palma, Andreza Aparecida, 2015. "Forecasting Inflation with the Phillips Curve: A Dynamic Model Averaging Approach for Brazil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 69(4), December.
    12. Fernando Siqueira Dos Santos, 2016. "Okun’S Law And Labor Productivity In Brazil," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 232, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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