Is the Phillips Curve a Curve? Some Evidence and Implications for Australia

Economic Record, Vol. 74, No. 227, pp. 384-398, December 1998

Posted: 5 Oct 2010

See all articles by Guy Debelle

Guy Debelle

Reserve Bank of Australia

James I. Vickery

Federal Reserve Bank of New York

Date Written: October 4, 1997

Abstract

The Phillips curve has generally been estimated in a linear framework. This paper investigates the possibility that the Phillips curve is indeed a curve, and shows that a convex short-run Phillips curve may be a more accurate representation of reality than the traditionally used linear specification. The paper also discusses the policy implications of convexity in the Phillips curve. These include the need for policy to be forward-looking and to act pre-emptively. Convexity provides a strong rationale for stabilization policy, and it reinforces the need for policy makers to proceed cautiously. It also implies that deep recessions may have only a marginally greater disinflationary impact than shallower ones, unless they induce large credibility bonuses.

Keywords: Phillips Curve, Inflation, Unemployment, Nonlinearities

JEL Classification: E24, E31

Suggested Citation

Debelle, Guy and Vickery, James Ian, Is the Phillips Curve a Curve? Some Evidence and Implications for Australia (October 4, 1997). Economic Record, Vol. 74, No. 227, pp. 384-398, December 1998, Available at SSRN: https://ssrn.com/abstract=1687182

Guy Debelle (Contact Author)

Reserve Bank of Australia ( email )

65, Martin Place
Sydney, NSW 2000
Australia

James Ian Vickery

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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