Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States

Author/Editor:

Douglas Laxton ; Guy Debelle

Publication Date:

October 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Previous tests for convexity in the Phillips curve have been biased because researchers have employed filtering techniques for the NAIRU that have been fundamentally inconsistent with the existence of convexity. This paper places linear and nonlinear models of the Phillips curve on an equal statistical footing by estimating model-consistent measures of the NAIRU. After imposing plausible restrictions on the variability in the NAIRU we find that the nonlinear model fits the data best. The implications for the macroeconomic policy debate is that policymakers that are unsuccessful in stabilizing the business cycle will induce a higher natural rate of unemployment.

Series:

Working Paper No. 1996/111

Subject:

Business cycles Economic growth Financial markets Financial services Inflation Labor Prices Real interest rates Securities markets Unemployment rate

Notes:

Also published in Staff Papers, Vol. 44, No. 2, June 1997.

English

Publication Date:

October 1, 1996

ISBN/ISSN:

9781451853421/1018-5941

Stock No:

WPIEA1111996

Pages:

38

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