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Phillips Curve and the Equilibrium Rate of Unemployment

Author

Listed:
  • G. C. Lim

    () (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • R. Dixon

    (Department of Economics, The University of Melbourne)

  • Sarantis Tsiaplias

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

A time-varying Phillips curve was estimated as a means to examine the changing nature of the negative relationship between wage inflation and the unemployment rate in Australia. The implied equilibrium unemployment rate was generated and the analysis showed the important role played by variations in the slope of the Phillips curve (and thus in real wage rigidity) in changing the equilibrium unemployment rate. The deviations of actuals from the estimated equilibrium unemployment rates also performed well as measures of inflationary pressures.

Suggested Citation

  • G. C. Lim & R. Dixon & Sarantis Tsiaplias, 2008. "Phillips Curve and the Equilibrium Rate of Unemployment," Melbourne Institute Working Paper Series wp2008n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2008n21
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2008n21.pdf
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