Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States
AbstractPrevious tests for convexity in the Phillips curve have been biased because researchers have employed filtering techniques for the nonaccelerating inflation rate of unemployment (NAIRU) that have been fundamentally inconsistent with the existence of convexity. This paper places linear and nonlinear models of the Phillips curve on an equal statistical footing by estimating model-consistent measures of the NAIRU. After imposing plausible restrictions on the variability in the NAIRU, we find that the nonlinear model fits the data best. The implications for the macro-economic policy debate are that policymakers who are unsuccessful in stabilizing the business cycle will induce a higher natural rate of unemployment.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.
Volume (Year): 44 (1997)
Issue (Month): 2 (June)
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Other versions of this item:
- Douglas Laxton & Guy Debelle, 1996. "Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States," IMF Working Papers 96/111, International Monetary Fund.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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