Phillips Curves, Phillips Lines and the Unemplyment Costs of Overheating

February 1, 1997

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Format: Chicago

Douglas Laxton, and Peter B. Clark Phillips Curves, Phillips Lines and the Unemplyment Costs of Overheating, (USA: International Monetary Fund, 1997) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Disinflation, Inflation, Unemployment, Unemployment rate, Wages

Keywords: Excess demand, Inflation rate, Monetary policy, WP

Publication Details

Pages:

50
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/017
Stock No:

WPIEA0171997
ISBN:

9781451843507
ISSN:

1018-5941

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