Phillips Curves, Phillips Lines and the Unemplyment Costs of Overheating
February 1, 1997
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Summary
Most empirical work on the U.S. Phillips curve has had a strong tendency to impose global linearity on the data. The basic objective of this paper is to reconsider the issue of nonlinearity and to underscore its importance for policymaking. After briefly reviewing the history of the Phillips curve and the basis for convexity, we derive it explicitly using standard models of wage and price determination. We provide some empirical estimates of Phillips curves and Phillips lines for the United States and use some illustrative simulations to contrast the policy implications of the two models.
Subject: Disinflation, Inflation, Unemployment, Unemployment rate, Wages
Keywords: excess demand, inflation rate, monetary policy, WP
Pages:
50
Volume:
1997
DOI:
Issue:
017
Series:
Working Paper No. 1997/017
Stock No:
WPIEA0171997
ISBN:
9781451843507
ISSN:
1018-5941
