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

Debelle, Guy; Laxton, Douglas

doi:10.2307/3867544

Cited by 115 publications

(99 citation statements)

References 6 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The literature has provided some reasons for the apparent breakdown in the Phillips curve -the "missing deflation puzzle": (i) inflation expectations have become more anchored, reflecting an increase in central bank credibility (Ball and Mazumder 2011, Watson 2014, Hatzius and Stehn 2014; (ii) the importnace of (external) supply shocks has increased over time, implying that inflation has become less sensitive to domestic developments (Gordon 2013, Watson 2014(iii) difficulties in the measurement of labour market slack, especially in the light of the large decline in participation rate (Gordon 2013, Krueger et al 2014, Rudebusch and Williams 2014, Watson 2014; and , finally, (iv) the existence of non-linearities in the relationship between inflation and labour market slack (Debelle and Laxton 1997, Ball and Mazumder 2011, Peach et al 2011, Hatzius and Stehn 2014.…”

Section: Non-technical Summarymentioning

confidence: 99%

Will US inflation awake from the dead? The role of slack and non-linearities in the Phillips curve

Albuquerque

Baumann

2017

Journal of Policy Modeling

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Terms of use: Documents in EconStor may Working Paper SeriesWill US inflation awake from the dead? The role of slack and non-linearities in the Phillips curve The selection and refereeing process for this paper was carried out by the Chairs of the Task Force. Papers were selected based on their quality and on the relevance of the research subject to the aim of the Task Force. The authors of the selected papers were invited to revise their paper to take into consideration feedback received during the preparatory work and the referee's and Editors' comments.The paper is released to make the research of LIFT generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB, the ESCB, or any of the ESCB National Central Banks. Our main findings suggest that a Phillips curve model augmented with supply shocks and inflation expectations, estimated between 1992Q1 and 2007Q4, can explain rather well the behaviour of inflation after the Great Recession, with little apparent evidence of a missing deflation puzzle. We find that the Phillips curve specification with slack measured by the LMTI is consistently among the best performing specifications, together with the headline, mediumterm and long-term unemployment gaps. More important than the choice of the slack measure, however, is the consideration of a time-variation in the Phillips curve slope. Regressions on a rolling window as well as time-varying estimates using the Kalman filter confirm that the slope does vary over time. ECBIn an out-of-sample forecasting exercise, our models that take into account the time-varying nature of the slope coefficient exhibit the highest forecasting accuracy over 2008Q1 to 2015Q1.In addition, we find that the other (constant-slope) non-linear specifications explored in this paper do not seem to improve on the forecasting accuracy of the linear models.

show abstract

Section: Non-technical Summarymentioning

confidence: 99%

Will US inflation awake from the dead? The role of slack and non-linearities in the Phillips curve

Albuquerque

Baumann

2017

Journal of Policy Modeling

View full text Add to dashboard Cite

show abstract

“…Clark and Laxton (1997), Debelle and Laxton (1997), Laxton et al (1999), and Tambakis proposed specification has several appealing properties. However, we do not follow this approach as it imposes stronger functional form restrictions than a flexible spline specification.…”

Section: Econometric Specificationmentioning

confidence: 99%

“…Meanwhile, much of the Phillips curve research using regional 1 See for example, Akerlof et al (1996), Clark et al (1996), Laxton et al (1995), Clark and Laxton (1997), Debelle and Laxton (1997), Laxton et al (1999), Tambakis (1999), Turner (1995), Filardo (1998), Schaling (2004), Barnes and Olivei (2003), Huh et al (2009), andFuhrer et al (2012).…”

Section: Introductionmentioning

confidence: 99%

A closer look at the Phillips curve using state-level data

Kumar

Orrenius

2016

Journal of Macroeconomics

View full text Add to dashboard Cite

Studies that estimate the Phillips curve for the U.S. use mainly national-level data and find mixed evidence of nonlinearity, with some recent studies either rejecting nonlinearity or estimating only modest convexity. In addition, most studies do not make a distinction between the relative impacts of short-term vs. long-term unemployment on wage inflation. Using statelevel data from1982 to 2013, we find strong evidence that the wage-price Phillips curve is nonlinear and convex; declines in the unemployment rate below the average unemployment rate exert significantly higher wage pressure than changes in the unemployment rate above the historical average. We also find that the short-term unemployment rate has a strong relationship with both average and median wage growth, while the long-term unemployment rate appears to only influence median wage growth.

show abstract

“…Clark, Laxton et Rose (1996), Gordon (1997), Eisner (1997) et Debelle et Laxton (1997) utilisent le même genre de tests pour déceler la présence d'asymétries dans la relation inflation-chômage, mais en arrivent à des conclusions très différentes. Clark, Laxton et Rose ajoutent à la relation de Phillips une variable de demande excédentaire lorsque celle-ci est positive tout en s'appuyant sur une distinction entre le NAIRU et le taux de chômage naturel défini comme une moyenne historique du taux de chômage.…”

Section: La Non-linéarité De La Courbe De Phillipsunclassified

“…De même, Yates (1998) ne détecte aucune non-linéarité significative. Debelle et Laxton (1997) reprennent l'étude de Gordon en utilisant des mesures du NAIRU qui sont cohérentes avec les modèles retenus (linéaire ou convexe) 39 . Ils concluent, contrairement à Gordon (1997), qu'une courbe de Phillips convexe explique mieux les données.…”

Section: La Non-linéarité De La Courbe De Phillipsunclassified

Les neuf vies de la courbe de Phillips américaine : réincarnations ou résilience ?

Fauvel

Guay

Paquet

2007

View full text Add to dashboard Cite

RÉSUMÉ -Au cours des années quatre-vingt-dix, le comportement de l'inflation aux États-Unis a constitué une énigme pour beaucoup d'observateurs; le taux de chômage américain s'est maintenu pendant huit ans sous le seuil de 6 % sans que cela donne lieu à une accélé-ration notable de la croissance des prix et des salaires. À nouveau, la pertinence théorique et empirique de la courbe de Phillips a été contestée. Cet article fait état des explications avancées par les économistes pour élucider cette énigme ainsi que des débats relatifs à une remise en question de la courbe de Phillips. Ce faisant, nous présentons une revue des contributions théoriques et empiriques récentes à la littérature sur la courbe de Phillips.ABSTRACT -In the 90s, the behaviour of US inflation has been a puzzle for many analysts; for eight years, the unemployment rate remained below 6 % without giving rise to a significant acceleration of prices and wages. Once again, both the theoretical and empirical relevance of the Phillips curve has been questioned. This paper reassesses explanations proposed by economists to solve this puzzle, as well as the issues pertaining to the debates about the Phillips curve. Recent theoretical and empirical contributions in the literature on the Phillips curve are also reviewed.

show abstract

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

Abstract: This is aWorking Paper and the authors) would welcome any comments on the present text. Citations should refer to a Working Paper of the International Monetary Fund The views expressed are those of the author(s) and do not necessarily represent those of the Fund.

Cited by 115 publications

References 6 publications

Will US inflation awake from the dead? The role of slack and non-linearities in the Phillips curve

Will US inflation awake from the dead? The role of slack and non-linearities in the Phillips curve

A closer look at the Phillips curve using state-level data

Les neuf vies de la courbe de Phillips américaine : réincarnations ou résilience ?

Contact Info

Product

Resources

About