What a Puzzle! Why UK Phillips Curves are Unstable
Unstable Phillips’ curves are demonstrated for the UK: every slope in sub-period relationships between nominal wage inflation and the unemployment rate from strongly negative, slightly negative, flat, slightly positive and strongly positive occurs in a time series from 1860 to 2021. These outcomes are predicted by a general econometric model of real-wage growth over that sample expressed in terms of nominal wage inflation, revealing a close match in every sub-period. Thus its `shift’ variables account for the instabilities. Correcting nominal wage inflation for its explanatory variables other than unemployment, its sub-period regressions on unemployment all have the same negative slope revealing the original Phillips’ curves and confirming that in a non-stationary world, the general equation is a more useful way to model the inflation-unemployment relation important to economic policy.
Date: 19 October 2023, 14:00 (Thursday, 2nd week, Michaelmas 2023)
Venue: Virtual event via Zoom
Speaker: Prof Sir David Hendry (INET Oxford, University of Oxford)
Organising department: Institute for New Economic Thinking
Organiser: Susan Mousley (INET Oxford Admin Team)
Organiser contact email address: events@inet.ox.ac.uk
Part of: INET Oxford Researcher Seminars
Booking required?: Required
Booking url: https://www.eventbrite.co.uk/e/explaining-unstable-uk-phillips-curves-david-hendry-tickets-685522344787
Booking email: events@inet.ox.ac.uk
Audience: Public
Editor: Susan Mousley