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The Phillips Curve in Australia

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  • David Gruen

    (Reserve Bank of Australia)

  • Adrian Pagan

    (Australian National University)

  • Christopher Thompson

    (Reserve Bank of Australia)

Abstract

In this paper we discuss the development of Phillips curves in Australia over the forty years since Phillips first estimated one using Australian data. We examine the central issues faced by researchers estimating Australian Phillips curves. These include the distinction between the short and long-run trade-offs between inflation and unemployment, and the changing level of the non-accelerating inflation rate of unemployment (NAIRU), particularly in the 1970s. We estimate Phillips curves for prices and unit labour costs in Australia over the past three decades. These Phillips curves allow the NAIRU to change through time, and include a role for import prices and ‘speed-limit’ effects. The paper concludes by presenting an extended discussion of the changing role of the Phillips curve in the intellectual framework used to analyse inflation within the Reserve Bank of Australia over the past three decades.

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Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp1999-01.

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Date of creation: Jan 1999
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Handle: RePEc:rba:rbardp:rdp1999-01

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Keywords: Phillips curve; inflation; unemployment; monetary policy;

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