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IS THE PHILLIPS CURVE DIFFERENT IN POOR COUNTRIES?
Author(s) -
Bleaney Michael,
Francisco Manuela
Publication year - 2018
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12124
Subject(s) - phillips curve , economics , inflation (cosmology) , keynesian economics , econometrics , empirical evidence , positive correlation , negative correlation , supply shock , monetary economics , monetary policy , macroeconomics , medicine , philosophy , physics , epistemology , theoretical physics
It has been suggested that the Phillips curve (positive output‐inflation correlation) is inverted in poor countries. It is argued here that the truth is more complex. In poor countries temporary supply‐side shocks, for example to agricultural output, induce a negative correlation between prices and output rather than between inflation rates and output. Empirical evidence supports this hypothesis.