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Phillips Curves, Phillips Lines and the Unemplyment Costs of Overheating

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  • Douglas Laxton
  • Peter B. Clark

Abstract

Most empirical work on the U.S. Phillips curve has had a strong tendency to impose global linearity on the data. The basic objective of this paper is to reconsider the issue of nonlinearity and to underscore its importance for policymaking. After briefly reviewing the history of the Phillips curve and the basis for convexity, we derive it explicitly using standard models of wage and price determination. We provide some empirical estimates of Phillips curves and Phillips lines for the United States and use some illustrative simulations to contrast the policy implications of the two models.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 97/17.

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Length: 50
Date of creation: 01 Feb 1997
Date of revision:
Handle: RePEc:imf:imfwpa:97/17

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Cited by:
  1. Marco Vega & Diego Winkelried, 2004. "How Does Global Disinflation Drag Inflation in Small Open Economies?," Macroeconomics, EconWPA 0403008, EconWPA.
  2. J. J. Dolado & R. Maria-Dolores & F. J. Ruge-Murcia, 2002. "Nonlinear Monetary Policy Rules: Some New Evidence For The Us," Economics Working Papers we022910, Universidad Carlos III, Departamento de Economía.
  3. Jorge E. Restrepo L., 2008. "Estimating the NAIRU for Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, Central Bank of Chile, vol. 11(2), pages 31-46, August.
  4. repec:spo:wpecon:info:hdl:2441/1903 is not listed on IDEAS
  5. Richard Black & David Rose, 1997. "Canadian Policy Analysis Model: CPAM," Working Papers, Bank of Canada 97-16, Bank of Canada.
  6. Rod Cross & Julia Darby & Jonathan Ireland, 1997. "Uncertainties Surrounding Natural Rate Estimates in the G7," Working Papers, Business School - Economics, University of Glasgow 9712, Business School - Economics, University of Glasgow.
  7. Debelle, Guy & Vickery, James, 1998. "Is the Phillips Curve a Curve? Some Evidence and Implications for Australia," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 74(227), pages 384-98, December.
  8. S. Sgherri, 2000. "When is labour market flexibility welcome? More on asymmetric policy impacts in Europe," WO Research Memoranda (discontinued), Netherlands Central Bank, Research Department 619, Netherlands Central Bank, Research Department.
  9. Jorge E. Restrepo, 2006. "Estimaciones de NAIRU para Chile," Working Papers Central Bank of Chile, Central Bank of Chile 361, Central Bank of Chile.
  10. 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, Elsevier, vol. 22(2), pages 219-251, March.
  11. Peter Isard & Douglas Laxton & Ann-Charlotte Eliasson, 2001. "Inflation Targeting with NAIRU Uncertainty and Endogenous Policy Credibility," IMF Working Papers 01/7, International Monetary Fund.
  12. Jeff Borland & Ian McDonald, 2000. "Labour Market Models of Unemployment in Australia," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2000n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  13. David Mayes & Matti Viren, 2002. "Asymmetry and the Problem of Aggregation in the Euro Area," Empirica, Springer, Springer, vol. 29(1), pages 47-73, March.

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