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Mr Phillips and the medium-run: temporal instability vs. frequency stability

Michele Fratianni (), Marco Gallegati () and Federico Giri ()

No 155, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: The paper goes back to the original insight by Phillips and investigates the negative relationship between money wage inflation and the unemployment rate occurring at frequency bands that stretch beyond those of the business cycle. We use UK annual data for the period 1861-2015, and post- WWII quarterly data from 1960 to 2016. The two critical findings are that the wage Phillips Curve is predominantly a medium-run phenomenon, comprised in the 8-to16-year frequency band, and that the curve disappears beyond this range. Similar conclusions are reached using the post-WWII quarterly sample: at the aggregate level and at high frequencies the PC relationship is unstable over time, whereas in the frequency range between 32 to 64 quarters (our medium run timescale), this time dependency disappears.

Keywords: Phillips Curve; frequency bands; wavelet; medium run (search for similar items in EconPapers)
JEL-codes: E00 E30 E31 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2019-07
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