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Employment Growth, Inflation and Output Growth: Was Phillips Right?: Evidence from a Dynamic Panel

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  • Guglielmo Maria Caporale
  • Marinko Skare

Abstract

In this paper we analyse the short- and long-run relationship between employment growth, inflation and output growth in Phillips' tradition. For this purpose we apply FMOLS, DOLS, PMGE, MGE, DFE, and VECM methods to a nonstationary heterogeneous dynamic panel including annual data for 119 countries over the period 1970-2010, and also carry out multivariate Granger causality tests. The empirical results strongly support the existence of a single cointegrating relationship between employment growth, inflation and output growth with bidirectional causality between employment growth and inflation as well as output growth, giving support to Phillips' Golden Triangle theory.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.376276.de/dp1138.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1138.

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Length: 27 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diwwpp:dp1138

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Keywords: Employment growth; inflation; output growth; Golden Triangle theory;

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