What a puzzle! Unravelling why UK Phillips curves were unstable
The UK relationship between nominal wage inflation and the unemployment rate is unstable. Over sub-periods of the last 160 years of turbulent data, Phillips curve slopes range from strongly negative, slightly negative, flat, slightly positive and strongly positive. Our constant-parameter congruent m...
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| Médium: | Journal article |
| Jazyk: | English |
| Vydáno: |
Wiley
2024
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| Shrnutí: | The UK relationship between nominal wage inflation and the unemployment rate is unstable. Over sub-periods of the last 160 years of turbulent data, Phillips curve slopes range from strongly negative, slightly negative, flat, slightly positive and strongly positive. Our constant-parameter congruent model of real wages explains these instabilities, yet also implies a constant negative relationship between nominal wage inflation and the unemployment rate when corrected by its regressors. Disentangling these effects reveals that structural breaks in the real-wage model's variables do not explain the instabilities, which instead occur during sub-periods when some of its explanatory variables are insignificant. |
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