The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy
AbstractExpanding on an approach suggested by Ashenfelter (1984), we extend the Phillips curve to an open economy and exploit panel data to estimate the textbook 'expectations augmented' Phillips curve with a market-based and observable measure of inflation expectations. We develop this measure using assumptions common in economic analysis of open economies. Using quarterly data from 9 OECD countries and the simplest econometric specification, we estimate the Phillips curve with the same functional form for the 1970s, 1980s, and 1990s. Our analysis suggests that although changing expectations played a role in creating the empirical failure of the Phillips Curve in the 1970s, supply shocks were at least as important.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7328.
Date of creation: Aug 1999
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Other versions of this item:
- DiNardo, J. & Moore, M.P., 1999. "The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy," Papers 99-00-04, California Irvine - School of Social Sciences.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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- King, Robert G. & Watson, Mark W., 1994.
"The post-war U.S. phillips curve: a revisionist econometric history,"
Carnegie-Rochester Conference Series on Public Policy,
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- Robert G. King & Mark W. Watson, 1994. "The post-war U.S. Phillips curve: a revisionist econometric history," Working Paper Series, Macroeconomic Issues 94-14, Federal Reserve Bank of Chicago.
- Robert E. Lucas, Jr. & Thomas J. Sargent, 1979. "After Keynesian macroeconomics," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
- Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
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