Phillips Curves, Phillips Lines and the Unemplyment Costs of Overheating

Douglas Laxton and Peter Clark

No 1997/017, IMF Working Papers from International Monetary Fund

Abstract: Most empirical work on the U.S. Phillips curve has had a strong tendency to impose global linearity on the data. The basic objective of this paper is to reconsider the issue of nonlinearity and to underscore its importance for policymaking. After briefly reviewing the history of the Phillips curve and the basis for convexity, we derive it explicitly using standard models of wage and price determination. We provide some empirical estimates of Phillips curves and Phillips lines for the United States and use some illustrative simulations to contrast the policy implications of the two models.

Keywords: WP; excess demand; inflation rate; monetary policy (search for similar items in EconPapers)
Pages: 50
Date: 1997-02-01
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Citations: View citations in EconPapers (28)

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