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The Evolution of the Phillips Curve: A Modern Time Series Viewpoint
Author(s) -
GRANGER CLIVE W. J.,
JEON YONGIL
Publication year - 2011
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2009.00839.x
Subject(s) - phillips curve , econometrics , unemployment , inflation (cosmology) , causation , proxy (statistics) , nonlinear system , series (stratigraphy) , economics , time series , econometric model , mathematics , statistics , macroeconomics , geology , theoretical physics , paleontology , physics , quantum mechanics , political science , law
Phillips' (1958) original curve involves a nonlinear relationship between inflation and unemployment. We consider how his original results change due to updated theoretic and empirical studies, increased computer power, enlarged datasets, increases in data frequency and developed time series econometric models. In the linear models, there was weak causation from unemployment to inflation. Rather than using any of the many nonlinear models that are now available, we adopt a time‐varying parameter linear model as their convenient proxy, which empirically supports Phillips' use of nonlinear model form and causation, but the strength of this result is much weaker in recent periods.