Benigno, Pierpaolo; Ricci, Luca Antonio - Istituto Einaudi per l'Economia e la Finanza (EIEF) - 2010
In the presence of downward nominal wage rigidities, wage setters take into account the future consequences of their current wage choices, when facing both idiosyncratic and aggregate shocks. We derive a closed-form solution for a longrun Phillips curve which relates average output gap to...