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Is the short-run Phillips curve nonlinear? Empirical evidence for Australia, Sweden and the United States

Author

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  • Eliasson, Ann-Charlotte

    (Dept. of Economic Statistics, Stockholm School of Economics)

Abstract

The Phillips curve has generally been estimated in a linear framework which implies a constant relationship between inflation and unemployment. Lately there have been several studies which claim that the slope of the Phillips curve is a function of macroeconomic conditions and that the relationship is asymmetric. If this is true the assumption of linearity is too restrictive. In this paper linear Phillips curves for Australia, Sweden and the United States are tested for linearity and parameter constancy. The nonlinear alternative is specified as a smooth transition regression model. It turns out that linearity is rejected for both Australia and Sweden while the Phillips curve for the United States is linear.

Suggested Citation

  • Eliasson, Ann-Charlotte, 1999. "Is the short-run Phillips curve nonlinear? Empirical evidence for Australia, Sweden and the United States," SSE/EFI Working Paper Series in Economics and Finance 330, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0330
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    Citations

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    Cited by:

    1. Barrera, Carlos, 2014. "La relación entre los ciclos discretos en la inflación y el crecimiento: Perú 1993 - 2012," Working Papers 2014-024, Banco Central de Reserva del Perú.
    2. repec:zbw:bofrdp:2004_009 is not listed on IDEAS
    3. Areosa, Waldyr Dutra & McAleer, Michael & Medeiros, Marcelo C., 2011. "Moment-based estimation of smooth transition regression models with endogenous variables," Journal of Econometrics, Elsevier, vol. 165(1), pages 100-111.
    4. Frédérick Demers, 2003. "The Canadian Phillips Curve and Regime Shifting," Staff Working Papers 03-32, Bank of Canada.
    5. David Mayes & Matti Viren, 2002. "Asymmetry and the Problem of Aggregation in the Euro Area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 29(1), pages 47-73, March.
    6. Mayes, David & Virén, Matti, 2004. "Asymmetries in the Euro area economy," Bank of Finland Research Discussion Papers 9/2004, Bank of Finland.
    7. David G. Mayes & Matti Virén, 2004. "Asymmetries in the Euro area economy," Macroeconomics 0404024, University Library of Munich, Germany.
    8. repec:zbw:bofrdp:2000_011 is not listed on IDEAS
    9. Wilman Gomez, 2014. "Business cycle asymmetries: Loss aversion, sticky prices, and wages," Documentos de Trabajo 11756, Universidad del Rosario.
    10. David Mayes & Matti Viren, 2002. "Asymmetry and the Problem of Aggregation in the Euro Area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 29(1), pages 47-73, March.
    11. Juncal Cunnado & Fernando PErez De Gracia, 2003. "Sacrifice Ratios: Some lessons from EMU countries, 1960-2001," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(3), pages 327-337.
    12. Mayes, David G. & Viren, Matti, 2005. "Monetary policy problems for currency unions: asymmetry and the problem of aggregation in the euro area," Economic Modelling, Elsevier, vol. 22(2), pages 219-251, March.

    More about this item

    Keywords

    Phillips curve; dynamic model; econometric model building; encompassing; parameter constancy; smooth transition regression;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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