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Revisiting the Phillips Curve with a Structural VAR

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  • Falk, Barry
  • Lee, Bong-Soo

Abstract

Our purpose is to examine the broad consistency of the data with the stylized predictions ofa simple textbook Keynesian model of inflation and unemployment. Models in this class, despite their simplicity and lack of a firm foundation in general equilibrium theory, form the basis for much of what we teach our undergraduates and for much of the public and media discussion of macroeconomic events and policies. Furthermore, the "reasonableness" of more sophisticated micro-based macroeconomic models are often judged according to how well their conclusions correspond to those that come from the aggregate supply and aggregate demand framework.

Suggested Citation

  • Falk, Barry & Lee, Bong-Soo, 1999. "Revisiting the Phillips Curve with a Structural VAR," ISU General Staff Papers 199903010800001326, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:199903010800001326
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156, National Bureau of Economic Research, Inc.
    3. Keating, John W & Nye, John V, 1998. "Permanent and Transitory Shocks in Real Output: Estimates from Nineteenth-Century and Postwar Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(2), pages 231-251, May.
    4. Jordi Galí, 1992. "How Well Does The IS-LM Model Fit Postwar U. S. Data?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 709-738.
    5. Robert G. King, 1993. "Will the New Keynesian Macroeconomics Resurrect the IS-LM Model?," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 67-82, Winter.
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