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Does Modern Econometrics replicate the Phillips Curve?

Fatemeh Shadman

No 1996015, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper reexamines the existence of a long-run relationship between wages and unemployment in the U.K., with data over the period 1860-1913 used by A.W. Phillips to derive the well-known Phillips Curve. Using Johansen's maximum likelihood method of testing for cointegration, a long-run inverse relationship is indeed depicted between the rate of inflation and the unemployment rate. However, the main impact of deviations from this long-run equilibrium is on the unemployment rate rather than the rate of inflation.

Keywords: Phillips Curve; long-run equilibrium; cointegration (search for similar items in EconPapers)
JEL-codes: C32 C52 E24 (search for similar items in EconPapers)
Pages: 21
Date: 1996-06-01
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