The Phillips Curve and Oil Prices

Abstract

This paper investigates the "Phillips curve", a controversial topic in macroeconomics. Many economists claim the Phillips curve is unreliable; recent evidence suggests economists should reconsider the Phillips curve. In particular, this paper investigates a modified Phillips curve, broadly consistent with the 1958 paper by Phillips: it includes import prices as an important influence on inflation. Analysis begins with UK data, as a case study: three Figures are shown, with a discussion on effects of OPEC global oil prices-rises in 1970s. This paper reports regression evidence, for nine countries, which support the idea that the Phillips curve is clearer if we control for import prices.