Global warming, Climate change, Fiscal sustainability, Disasters, Q54, Q58, F59, H87,

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This paper uses monthly survey data for the G7 countries for the time period 1989-2007 to explore the link between expectations on nominal wages, prices and unemployment rates as suggested by the wage and price Phillips curves. Four major fi ndings stand out. First, we fi nd that survey participants trust in both types of Phillips curve relationships. Second, we fi nd evidence in favor of nonlinearities in the price Phillips curve. Third, we take into account a kink in the price Phillips curve to indicate that the slope of the Phillips curve differs during the business cycle. We fi nd strong evidence of this feature in the data which confi rms recent theoretical discussions. Fourth, we employ our data to the expectations-augmented Phillips curve model. The results suggest that professional forecasters adopt this model when forecasting macroeconomic variables.

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