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

27 Pages Posted: 11 Jul 2011  

Guglielmo Maria Caporale

Brunel University - Centre for Empirical Finance

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). CESifo Working Paper Series No. 3502. Available at SSRN: https://ssrn.com/abstract=1883390

Guglielmo Maria Caporale (Contact Author)

Brunel University - Centre for Empirical Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Marinko Skare

Juraj Dobrila University of Pula ( email )

Preradoviceva 1/1
Pula, Istarska Zupanija 52100
Croatia
385 52 377000 (Phone)
385 52 216 416 (Fax)

HOME PAGE: http://www.efpu.hr

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