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

Anil Kumar and Pia Orrenius

No 1409, Working Papers from Federal Reserve Bank of Dallas

Abstract: 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 state-level data from 1982 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.

Keywords: Phillips curve; monetary policy; unemployment; wage growth (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2014-10-01
New Economics Papers: this item is included in nep-lma and nep-mac
Note: Published as: Kumar, Anil and Pia M. Orrenius (2016), "A Closer Look at the Phillips Curve Using State-Level Data," Journal of Macroeconomics, 47 (Part A): 84-102.
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Citations: View citations in EconPapers (12)

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Journal Article: A closer look at the Phillips curve using state-level data (2016)
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DOI: 10.24149/wp1409

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