Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States

38 Pages Posted: 15 Feb 2006

See all articles by Guy Debelle

Guy Debelle

Reserve Bank of Australia

Douglas Laxton

International Monetary Fund (IMF) - Research Department

Date Written: October 1996

Abstract

Previous tests for convexity in the Phillips curve have been biased because researchers have employed filtering techniques for the NAIRU that have been fundamentally inconsistent with the existence of convexity. This paper places linear and nonlinear models of the Phillips curve on an equal statistical footing by estimating model-consistent measures of the NAIRU. After imposing plausible restrictions on the variability in the NAIRU we find that the nonlinear model fits the data best. The implications for the macroeconomic policy debate is that policymakers that are unsuccessful in stabilizing the business cycle will induce a higher natural rate of unemployment.

JEL Classification: C51, E31, E52

Suggested Citation

Debelle, Guy and Laxton, Douglas, Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States (October 1996). IMF Working Paper No. 96/111, Available at SSRN: https://ssrn.com/abstract=883007

Guy Debelle (Contact Author)

Reserve Bank of Australia ( email )

65, Martin Place
Sydney, NSW 2000
Australia

Douglas Laxton

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

700 19th Street NW
Washington, DC 20431
United States

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