The concavity of the Phillips curve in time‐dependent pricing models

ABSTRACT This paper derives the curvature properties of the short‐run Phillips curve for a wide class of models with time‐dependent pricing frictions. The Phillips curve is globally concave under relatively weak conditions (the elasticity of substitution between goods is larger than 2). Intuitively, when economic activity is very high (low), substitution effects within the price index imply that inflation behaves as if prices are nearly fully sticky (flexible).