2009 Fiscal Year Final Research Report
Has the Phillips Curve Flattened?
| Project/Area Number |
19530278
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Public finance/Monetary economics
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| Research Institution | Hiroshima University |
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Principal Investigator |
SENDA Takashi Hiroshima University, 大学院・社会科学研究科, 教授 (00304387)
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| Project Period (FY) |
2007 – 2009
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| Keywords | インフレーション / 金融政策 / フィリップス曲線 / 主成分分析 / 労働の保蔵 |
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| Research Abstract |
In this study, we investigate what is the best measure of labor market pressure for predicting wage inflation in Japan. Principal components analysis is used to select a subset of independent variables from 11 labor market variables. The first component is interpreted as the active opening rate and the second component is interpreted as total hours worked. We estimate a standard Phillips curve for wage inflation that incorporates the active opening rate and total hours worked as regressors. We find that (hourly) real wage growth is positively related to the active opening rate and negatively related to total hours worked. The second component (representing total hours worked) may help explain why wage inflation has not risen substantially despite Japan experiencing high active opening rates in the mid-2000s, when both total hours worked and active opening rates increased. Although higher active opening rates put upward pressure on real wage growth, this upward pressure is offset by longer working hours, which tend to reduce (hourly) real wage growth.
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