Finance, monetary policy and the institutional foundations of the Phillips curve

Argitis, Georgios; Dafermos, Yannis

Abstract

The purpose of this paper is to examine the influence of financial commitments on the short-run Phillips curve, under different institutional structures of the labour and product market, degrees of euphoria and ratios of firms' to workers' outstanding debt. We develop a Post-Keynesian conflicting-claims model that explicitly incorporates the impact of workers' and firms' financial commitments on distribution conflict and inflation. We propose different versions of the short-run Phillips curve for a debt-financed economy. We explore the impact of monetary policy on the shape and the position of the Phillips curve. We show that the inflation effects of monetary policy cannot be identified without prior knowledge about the institutional and financial structures of the economy, as well as about borrowers' desired margins of safety.

Citation

Argitis, G., & Dafermos, Y. (2013). Finance, monetary policy and the institutional foundations of the Phillips curve. Review of Political Economy, 25(4), 607-623. https://doi.org/10.1080/09538259.2013.837326

• Journal Article Type: Article
• Acceptance Date: Feb 5, 2013
• Publication Date: Nov 13, 2013
• Deposit Date: Sep 2, 2019
• Journal: Review of Political Economy
• Print ISSN: 0953-8259
• Electronic ISSN: 1465-3982
• Publisher: Taylor and Francis Group
• Peer Reviewed: Peer Reviewed
• Volume: 25
• Issue: 4
• Pages: 607-623
• DOI: https://doi.org/10.1080/09538259.2013.837326
• Keywords: finance, monetary policy, institutional foundations, Phillips curve
• Related Public URLs: http://dx.doi.org/10.1080/09538259.2013.837326