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Is the Short-run Phillips Curve Nonlinear? Empirical Evidence for Australia, Sweden and the United States

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  • Eliasson, Ann-Charlotte

    (Stockholm School of Economics)

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    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 is 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 appears to be linear.

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    File URL: http://www.riksbank.se/upload/Dokument_riksbank/Kat_foa/wp_124.pdf
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    Bibliographic Info

    Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 124.

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    Length: 26 pages
    Date of creation: 01 Sep 2001
    Date of revision:
    Handle: RePEc:hhs:rbnkwp:0124

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    Related research

    Keywords: Phillips curve; dynamic model; econometric model building; encompassing; parameter constancy; smooth transition regression.;

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    References

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    9. repec:nbr:nberre:0126 is not listed on IDEAS
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    Cited by:
    1. Gaetano D’Adamo, 2011. "Estimating Central Bank preferences in a small open economy: Sweden 1995-2009," Working Papers 1111, Department of Applied Economics II, Universidad de Valencia.
    2. José Luis Torres, 2006. "Modelos para la Inflación Básica de Bienes Transables y No Transables en Colombia," BORRADORES DE ECONOMIA 003246, BANCO DE LA REPÚBLICA.
    3. Gomes, O. & Mendes, D. A. & Mendes, V. P. & Sousa Ramos, J., 2007. "Endogenous Cycles in Optimal Monetary Policy with a Nonlinear Phillips Curve," Money Macro and Finance (MMF) Research Group Conference 2006 139, Money Macro and Finance Research Group.
    4. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
    5. Islam, Faridul & Shahbaz, Muhammad & Shabbir, Muhammad, 2011. "Phillips curve in a small open economy: A time series exploration of North Cyprus," MPRA Paper 28397, University Library of Munich, Germany.
    6. repec:iab:iabmit:v:36:i:4:p:411-427 is not listed on IDEAS

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