Phillips Curves, Phillips Lines and the Unemployment Costs of Overheating

50 Pages Posted: 15 Feb 2006

See all articles by Peter B. Clark

Peter B. Clark

International Monetary Fund (IMF)

Douglas Laxton

International Monetary Fund (IMF) - Research Department

Date Written: February 1997

Abstract

Most empirical work on the U.S. Phillips curve has had a strong tendency to impose global linearity on the data. The basic objective of this paper is to reconsider the issue of nonlinearity and to underscore its importance for policymaking. After briefly reviewing the history of the Phillips curve and the basis for convexity, we derive it explicitly using standard models of wage and price determination. We provide some empirical estimates of Phillips curves and Phillips lines for the United States and use some illustrative simulations to contrast the policy implications of the two models.

Keywords: Phillips curve, Unemployment, Monetary Policy

JEL Classification: C51, E31, E52

Suggested Citation

Clark, Peter B. and Laxton, Douglas, Phillips Curves, Phillips Lines and the Unemployment Costs of Overheating (February 1997). Available at SSRN: https://ssrn.com/abstract=882241 or http://dx.doi.org/10.2139/ssrn.882241

Peter B. Clark (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Douglas Laxton

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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