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The U.S. Phillips curve: The case for asymmetry |
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| Authors: | Douglas Laxton David Rose Demosthenes Tambakis |
| Affiliation: | 1. Department of Economics, 3133 Sproul Hall, University of California, Riverside, CA 92521, USA;2. Department of Economics and Related Studies, University of York, Heslington, York YO10 5DD, UK;1. School of Business Administration, South China University of Technology, Guangzhou 510640, China;2. Business School, Chinese University of Hong Kong, Shatin, NT, Hong Kong;1. Department of Business Economics, University of Colombo, Sri Lanka;2. Department of Economics, National University of Singapore, Singapore;3. School of Business, Edith Cowan University, Australia |
| Abstract: | Recent statistical rejections of convexity in the Phillips curve have been uninformative because researchers have employed measures of business cycle gaps that are inconsistent with the implications of convexity. The paper shows that identifying convexity in the Phillips curve will become even more difficult if policymakers are successful in avoiding large boom and bust cycles. To the extent that convexity in the Phillips curve is used as a rationale for stabilization policy, our findings present an interesting conundrum because successful policymakers will further weaken the empirical evidence on which such policies are based. |
| Keywords: | Phillips curve Unemployment Monetary policy |
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