This paper summarises the results of a quantitative study of the possible impact of downward nominal wage rigidity on the determination of inflation and output in the euro area and the existence of a non-vertical long-run Phillips curve. The study was undertaken in the context of the review of...

The paper presents an incomplete competition model (ICM), where inflation is determined jointly with unit labour cost growth. The ICM is estimated on data for the Euro area and evaluated against existing models, i.e. the implicit inflation equation of the Area Wide model (AWM) - cf. Fagan, Henry...