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Nonlinear models of the Phillips curve

Author

Listed:
  • Annalisa Cristini

    (University of Bergamo)

  • Piero Ferri

    (University of Bergamo)

Abstract

The recent flattening of the Phillips curve has stimulated new empirical research and theoretical discussions regarding the nonlinear nature of the changes in the parameters. The objective of the present paper is twofold: to detect the relevant type of the implied nonlinearity and look for some general model capable of generating a Phillips curve mimicking the empirical one. We find evidence of a convex US price Phillips curve, from 1961 q1 to 2019 q4, assessed both by piecewise and threshold models. The result presents some degree of novelty regarding the role of supply shocks and model-specific convexities; in addition, it supports the use of a regime-switching macro system. The latter accomplishes three tasks. It can generate a Phillips curve resembling its empirical counterparts; it creates a medium-run endogenous cycle where unemployment is not a NAIRU; finally, it opens new perspectives on economic policy issues.

Suggested Citation

  • Annalisa Cristini & Piero Ferri, 2021. "Nonlinear models of the Phillips curve," Journal of Evolutionary Economics, Springer, vol. 31(4), pages 1129-1155, September.
    • Handle: RePEc:spr:joevec:v:31:y:2021:i:4:d:10.1007_s00191-021-00736-5
    DOI: 10.1007/s00191-021-00736-5
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    1. Ferri, Piero & Cristini, Annalisa & Tramontana, Fabio, 2023. "Meta-models of the Phillips curve and income distribution," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 215-232.

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    More about this item

    Keywords

    Phillips curve; Threshold models; Regime switching; Medium-run growth models; Economic policies; Simulations;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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