An Econometric Analysis of the Short Run Philips Curve: Is It Still Relevant in Today’s Context?
Published in Jurnal Ekonomi, Universitas Tarumanagara, Indonesia (Economic Journal, Tarumanagara University, June 2004)
An Econometric Analysis of the Short Run Philips Curve: Is it still relevant in today’s context?
Enrico Tanuwidjaja∗ National University of Singapore, Department of Economics E-mail: g0305812@nus.edu.sg May 2004
Abstract The Phillips curve is generally been estimated in a linear framework, which implies a constant relationship between inflation and unemployment. Lately, there have been several studies, which claim that the slope of Phillips curve is function of macroeconomics conditions and that relationship is asymmetric. In this paper, we want to test the negative relationship between inflation and unemployment for the United State It turn out that the Phillips curve of United State is still relevant in today context.
Keywords: Phillips Curve, adaptive expectations, rational expectations, instrumentals variable, Inversed Phillips Curve.
The author is a Research Scholar in the Department of Economics, National University of Singapore. The author would like to thank Lew Baicheng, Goh Chunkeong, and Lee Kok How for their valuable time spent on doing this initial research. The first draft was completed in October 2001 and some minor revisions have been made on May 2004. The author also would like to acknowledge supports from Dr. Anthony Tay Swee Ann and the NUS Central Library. The responsibility for any errors or shortcomings remains ours. The views expressed herein is totally mine and not the Department of Economics, NUS.
∗
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1.
Introduction
The shape of the Phillips curve is central in conducting monetary policies. Many
empirical models of the Phillips curve for US are heavily influenced by the work of Gordon (1970, 1975, 1977, 1983, and 1997). His preferred Phillips curve specification is linear with backward looking inflation expectation .He allows for a kinked functional form and finds no significant evidence
An Econometric Analysis of the Short Run Philips Curve: Is it still relevant in today’s context?
Enrico Tanuwidjaja∗ National University of Singapore, Department of Economics E-mail: g0305812@nus.edu.sg May 2004
Abstract The Phillips curve is generally been estimated in a linear framework, which implies a constant relationship between inflation and unemployment. Lately, there have been several studies, which claim that the slope of Phillips curve is function of macroeconomics conditions and that relationship is asymmetric. In this paper, we want to test the negative relationship between inflation and unemployment for the United State It turn out that the Phillips curve of United State is still relevant in today context.
Keywords: Phillips Curve, adaptive expectations, rational expectations, instrumentals variable, Inversed Phillips Curve.
The author is a Research Scholar in the Department of Economics, National University of Singapore. The author would like to thank Lew Baicheng, Goh Chunkeong, and Lee Kok How for their valuable time spent on doing this initial research. The first draft was completed in October 2001 and some minor revisions have been made on May 2004. The author also would like to acknowledge supports from Dr. Anthony Tay Swee Ann and the NUS Central Library. The responsibility for any errors or shortcomings remains ours. The views expressed herein is totally mine and not the Department of Economics, NUS.
∗
| Page 1
1.
Introduction
The shape of the Phillips curve is central in conducting monetary policies. Many
empirical models of the Phillips curve for US are heavily influenced by the work of Gordon (1970, 1975, 1977, 1983, and 1997). His preferred Phillips curve specification is linear with backward looking inflation expectation .He allows for a kinked functional form and finds no significant evidence