More on Analyzing the Phillips Curve for the United States, 1950-1975

Cebula, Richard (1979): More on Analyzing the Phillips Curve for the United States, 1950-1975. Published in: Economia Internazionale , Vol. 33, No. 1 (26 February 1980): pp. 26-35.

Abstract

This study has questioned the use of single-equation estimates so common in the analysis of the Phillips curve relation. The analysis in Section II and the empirical results in both Sections III and IV suggest that further research on the Phillips curve relation should consider the merits of using simultaneous-equations models and estimating by TSLS. Failure to allow for possible simultaneity problems, such as might exist between the rate of change of money wage and the inflation rate, may result in empirical results and subsequent policy statements which have very questionable validity and relevance. Given the importance of Phillips curve research for economic policy, the methodological issue at hand clearly warrants, indeed requires, further examination.

• Item Type: MPRA Paper
• Language: English
• Keywords: inflation; the rate of change of money wages; simultaneity issues
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials

References

ASHENFELTER 0., JOHNSON G. and PENCAVEL J., "Trade Unions and the Rate of Change of Money Wages in United States Manufacturing Industry", Review of Economic Studies, January 1972, 27-54.

BERG S. V. and DALTON T. R., "Sectoral Employment and Shifts in the Aggregate Phillips Curve", Southern Economic Journal, April 1975, 593-601.

BOWEN W. and BERRY R., "Unemployment Conditions and Movements of the Money Wage Level", Review of Economics and Statistics, May 1963, 163-172.

BRECHLING F., "The Trade-off Between Inflation and Unemployment", Journal of Political Economy, July/August 1968, Part II, 712-737.

CARGILL T. F. and MEYER R. A., "Wages, Prices, and Unemployment: Distributed Lag Estimates", Journal of the American Statistical Association, March 1974, 98-107.

DESAI M.,"The Phillips Curve: A Revisionist Approach", Economica, February 1975, 1-19.

ECKSTEIN O., "Money Wage Determinants Revisited", Review of Economic Studies, April 1968, 133-143.

Economic Report of the President, 1976, Washington, D.C., 1976.

GODFREY L. and TAYLOR J., "Earnings Changes in the United Kingdom, 1954-1970: Excess Labor Supply, Expected Inflation, and Union Influence", Oxford Bulletin of Economics and Statistics, August 1973, 197-216.

HOFMAN W., "Die Phillips-Kurve in Deutschland", Kyklos, No. 2 1969, 219-231.

KALJSKI S., "The Relation Between Unemployment and the Rate of Change of Money Wages in Canada", International Economic Review , January 1964, 1-33.

KUH E., "A Productivity Theory of Wage Levels - An Alternative to the Phillips Curve", Review of Economic Studies, October 1967, 333-360.

LAIDLER. D., "Simultaneous Fluctuations in Prices and Output: A Business Cycle Approach", Economica, February 1973, 60-72.

LIPSEY R., "The Relation Between Unemployment and the Rate of Change of Money Wages in the U.K., 1862-1957 : A Further Analysis", Economica, February 1960, 1-31.

McCALLUM B. T., "Wage Rate Changes and the Excess Demand for Labor: An Al­ternative Formulation", Economica, August 1974, 269-277.

PERRY G. L., Unemployment, Money Wage Rates, and Inflation, Cambridge, Massa­chusetts, 1966.

PHELPS E. S., "Money Wage Dynamics and Labor Equilibrium", Journal of Political Economy, July/August 1968, Part II, 678-711.

PHILLIPS A. W., "The Relation Between Unemployment and the Rate of Change of Money Wages in the United Kingdom, 1861-1957", Economica, November 1958, 383-299.

SWIDINSKY R., "Trade Unions and the Rate of Change of Money Wages in Canada", Industrial and Labor Relations Review, April 1972, 363-375.

TURNOVSKY S. J., "The Expectations Hypothesis and the Aggregate Wage Equation: Some Empirical Evidence in Canada", Economica, February 1972, 1-17.

TURNOVSKY S. J. and WACHTER M. L., "A Test of the Expectations Hypothesis Using Directly Observed Wage and Price Expectations", Review of Economics and Statistics, February 1972, 47-54.

ZAIDI M., "The Determinants of Money Wage Rate Changes and Unemployment Inflation 'Trade-offs' in Canada", International Economic Review, June 1969, 207-219.