The short-run Phillips curve of the current spanish economy

Josep Baiges, César Molinas and Miguel Sebastián
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Miguel Sebastián: Universidad Complutense de Madrid, Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa)

No 87-15, Documentos de trabajo de la Facultad de Ciencias Económicas y Empresariales from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales

Abstract: Some economists have advocated an expansionary demand policy to reduce unemployment in Spain. This means accepting a negatively sloped short-run Phillips curve that would allow the exploitation of the celebratred trade-off between inflation and unemployment. This paper gives a qualitative characterization of the Spanish short-run Phillips curve. We argue that this curve is currently vertical and the apparent trade-off shown by the data is misleading, as it is caused by an increase in the equilibrium rate of unemployment. Consequently, the effects of an expansionary demand policy would mainly go into prices and the reduction of unemployment would be small.

Keywords: Phillips Curve; Unemployment; Curva de Phillip; Desempleo; Economía española. (search for similar items in EconPapers)
Pages: 28 pages
Date: 1987
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