Estimated Trade-Offs between Unemployment and Inflation

34 Pages Posted: 22 Apr 2004

See all articles by Ray C. Fair

Ray C. Fair

Yale University - Cowles Foundation; Yale School of Management - International Center for Finance

Date Written: June 1984

Abstract

Three models of price and wage behavior are estimated and tested in this paper. Model 1 is one in which the long-run trade-off between unemployment and inflation is in terms of price levels; Model 2 is one in which the trade-off is in terms of rates of change; and Model 3 is one in which there is no long-run trade-off. The evidence favors Model 1 over Models 2 and 3. The comparison between Models 2 and 3 is inconclusive. The short-run trade-offs are greater for Model 1 than for Models 2 and 3. The fact that Model 3 did not do particularly well is evidence against the Friedman-Phelps proposition of no long-run trade-off.

Suggested Citation

Fair, Ray C., Estimated Trade-Offs between Unemployment and Inflation (June 1984). NBER Working Paper No. w1377. Available at SSRN: https://ssrn.com/abstract=324018

Ray C. Fair (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3715 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://fairmodel.econ.yale.edu

Yale School of Management - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States
203-432-3715 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://fairmodel.econ.yale.edu

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