Abstract
We compare aggregate wage dynamics in Japan and the US from 1970 to 2013 from the perspective of the New Keynesian wage Phillips curve (NKWPC), derived by [Galí, Jordi. 2011a. “The Return of the Wage Phillips Curve.” Journal of the European Economic Association 9 (3): 436–461.]. We consider time variations in NKWPC’s parameters and make comparisons with micro-based evidence. Our main findings are three-fold. First, although Japan’s NKWPC has flattened over time, the slope of the NKWPC is much steeper in Japan than in the US. This suggests that nominal wage changes are less frequent in the US than in Japan. Second, inflation indexation, more prevalent in Japan in earlier periods, has recently become more important in the US although its role has declined over time in both countries. Third, our macro-level empirical results on the NKWPC are generally in line with micro-based evidence in each country, which suggests that the NKWPC provides a reasonable platform for modeling aggregate wage dynamics.
Acknowledgments
The authors are also grateful to Kosuke Aoki, Ichiro Fukunaga, Daisuke Ikeda, Koichiro Kamada, Seisaku Kameda, Mitsuru Katagiri, Munechika Katayama, Ryo Kato, Tomiyuki Kitamura, Takushi Kurozumi, Eiji Maeda, Koji Nakamura, Kenji Nishizaki, Takemasa Oda, Hiroyuki Oi, Takayuki Tsuruga, Isamu Yamamoto, and the participants at 2014 Japanese Economic Association Annual Spring Meeting and Asian Meeting of the Econometric Society 2014 for their advice and comments. We are also indebted to Editor Karel Mertens and an anonymous referee for helpful comments. The views expressed in this paper are those of the authors and do not necessarily reflect the official views of the Bank of Japan.
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Articles in the same Issue
- Contributions
- An empirical study on the New Keynesian wage Phillips curve: Japan and the US
- Risk averse banks and excess reserve fluctuations
- Advances
- Signaling in monetary policy near the zero lower bound
- Contributions
- Robust learning in the foreign exchange market
- Foreign official holdings of US treasuries, stock effect and the economy: a DSGE approach
- Discretion rather than rules? Outdated optimal commitment plans versus discretionary policymaking
- Agency costs and the monetary transmission mechanism
- Advances
- Optimal monetary policy in a model of vertical production and trade with reference currency
- The financial accelerator and marketable debt: the prolongation channel
- The welfare cost of inflation with banking time
- Prospect Theory and sentiment-driven fluctuations
- Contributions
- Household borrowing constraints and monetary policy in emerging economies
- The macroeconomic impact of shocks to bank capital buffers in the Euro Area
- The effects of monetary policy on input inventories
- The welfare effects of infrastructure investment in a heterogeneous agents economy
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- Collateral and development
- Contributions
- Financial deepening in a two-sector endogenous growth model with productivity heterogeneity
- Is unemployment on steroids in advanced economies?
- Monitoring and coordination for essentiality of money
- Dynamics of female labor force participation and welfare with multiple social reference groups
- Advances
- Technology and the two margins of labor adjustment: a New Keynesian perspective
- Contributions
- Changing demand for general skills, technological uncertainty, and economic growth
- Job competition, human capital, and the lock-in effect: can unemployment insurance efficiently allocate human capital
- Fiscal policy and the output costs of sovereign default
- Animal spirits in an open economy: an interaction-based approach to the business cycle
- Ramsey income taxation in a small open economy with trade in capital goods
Articles in the same Issue
- Contributions
- An empirical study on the New Keynesian wage Phillips curve: Japan and the US
- Risk averse banks and excess reserve fluctuations
- Advances
- Signaling in monetary policy near the zero lower bound
- Contributions
- Robust learning in the foreign exchange market
- Foreign official holdings of US treasuries, stock effect and the economy: a DSGE approach
- Discretion rather than rules? Outdated optimal commitment plans versus discretionary policymaking
- Agency costs and the monetary transmission mechanism
- Advances
- Optimal monetary policy in a model of vertical production and trade with reference currency
- The financial accelerator and marketable debt: the prolongation channel
- The welfare cost of inflation with banking time
- Prospect Theory and sentiment-driven fluctuations
- Contributions
- Household borrowing constraints and monetary policy in emerging economies
- The macroeconomic impact of shocks to bank capital buffers in the Euro Area
- The effects of monetary policy on input inventories
- The welfare effects of infrastructure investment in a heterogeneous agents economy
- Advances
- Collateral and development
- Contributions
- Financial deepening in a two-sector endogenous growth model with productivity heterogeneity
- Is unemployment on steroids in advanced economies?
- Monitoring and coordination for essentiality of money
- Dynamics of female labor force participation and welfare with multiple social reference groups
- Advances
- Technology and the two margins of labor adjustment: a New Keynesian perspective
- Contributions
- Changing demand for general skills, technological uncertainty, and economic growth
- Job competition, human capital, and the lock-in effect: can unemployment insurance efficiently allocate human capital
- Fiscal policy and the output costs of sovereign default
- Animal spirits in an open economy: an interaction-based approach to the business cycle
- Ramsey income taxation in a small open economy with trade in capital goods