Employment Growth, Inflation and Output Growth: Was Phillips Right? Evidence from a Dynamic Panel

27 Pages Posted: 11 Jul 2011

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Marinko Skare

Juraj Dobrila University of Pula

Date Written: June 30, 2011

Abstract

In this paper we analyse the short- and long-run relationship between employment growth, inflation and output growth in Phillips’ tradition. For this purpose we apply FMOLS, DOLS, PMGE, MGE, DFE, and VECM methods to a nonstationary heterogeneous dynamic panel including annual data for 119 countries over the period 1970-2010, and also carry out multivariate Granger causality tests. The empirical results strongly support the existence of a single cointegrating relationship between employment growth, inflation and output growth with bidirectional causality between employment growth and inflation as well as output growth, giving support to Phillips’ Golden Triangle theory.

Keywords: employment growth, inflation, output growth, Golden Triangle theory

JEL Classification: C230, E240, E310, E600

Suggested Citation

Caporale, Guglielmo Maria and Skare, Marinko, Employment Growth, Inflation and Output Growth: Was Phillips Right? Evidence from a Dynamic Panel (June 30, 2011). Available at SSRN: https://ssrn.com/abstract=1883390 or http://dx.doi.org/10.2139/ssrn.1883390

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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London South Bank University ( email )

Centre for Monetary and Financial Economics
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CESifo (Center for Economic Studies and Ifo Institute)

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German Institute for Economic Research (DIW Berlin) ( email )

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Marinko Skare

Juraj Dobrila University of Pula ( email )

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Croatia
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385 52 216 416 (Fax)

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