Phillips Curves, Phillips Lines and the Unemployment Costs of Overheating
50 Pages Posted: 15 Feb 2006
Date Written: February 1997
Abstract
Most empirical work on the U.S. Phillips curve has had a strong tendency to impose global linearity on the data. The basic objective of this paper is to reconsider the issue of nonlinearity and to underscore its importance for policymaking. After briefly reviewing the history of the Phillips curve and the basis for convexity, we derive it explicitly using standard models of wage and price determination. We provide some empirical estimates of Phillips curves and Phillips lines for the United States and use some illustrative simulations to contrast the policy implications of the two models.
Keywords: Phillips curve, Unemployment, Monetary Policy
JEL Classification: C51, E31, E52
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Asymmetric Effects of Economic Activity on Inflation: Evidence and Policy Implications
By Douglas Laxton and Guy Meredith
-
Asymmetry and the Problem of Aggregation in the Euro Area
By David G. Mayes and Matti Viren
-
Monetary Policy Rules in Practice: Evidence from New Zealand
By Angela Huang, Dimitri Margaritis, ...
-
The Inflation-Output Trade-Off: Is the Phillips Curve Symmetric? A Policy Lesson from New Zealand
-
The Nonlinearity of the Phillips Curve and European Monetary Policy
By Ilmo Pyyhtiä
-
By David G. Mayes and Matti Viren
-
Economic Implications of German Unification for the Federal Republic and the Rest of the World
By Paul R. Masson and Guy Meredith
-
Actual and Perceived Monetary Policy Rules in a Dynamic General Equilibrium Model of the Euro Area