The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy

John DiNardo and Mark P. Moore

No 7328, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Expanding on an approach suggested by Ashenfelter (1984), we extend the Phillips curve to an open economy and exploit panel data to estimate the textbook 'expectations augmented' Phillips curve with a market-based and observable measure of inflation expectations. We develop this measure using assumptions common in economic analysis of open economies. Using quarterly data from 9 OECD countries and the simplest econometric specification, we estimate the Phillips curve with the same functional form for the 1970s, 1980s, and 1990s. Our analysis suggests that although changing expectations played a role in creating the empirical failure of the Phillips Curve in the 1970s, supply shocks were at least as important.

JEL-codes: E31 F41 (search for similar items in EconPapers)
Date: 1999-08
New Economics Papers: this item is included in nep-lab
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Working Paper: The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy (1999)
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