American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Anatomy of the Phillips Curve: Micro Evidence and Macro Implications
American Economic Review
(pp. 3941–74)
Abstract
We develop a bottom-up approach to estimate the slope of the primitive form of the New Keynesian Phillips curve, which features marginal cost as the real activity variable. Using quarterly micro data on prices, costs, and output, we estimate dynamic pass-through regressions that identify the slope as a function of primitive parameters. We find a high slope for the cost-based Phillips curve, which contrasts with the low estimates of the conventional output gap–based formulation found in the literature. We reconcile by showing that the output elasticity of marginal cost is low, at least during moderate inflation periods (e.g., pre-pandemic).Citation
Gagliardone, Luca, Mark Gertler, Simone Lenzu, and Joris Tielens. 2025. "Anatomy of the Phillips Curve: Micro Evidence and Macro Implications." American Economic Review 115 (11): 3941–74. DOI: 10.1257/aer.20231569Additional Materials
JEL Classification
- C51 Model Construction and Estimation
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- L60 Industry Studies: Manufacturing: General