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Choice of Aggregate Demand Proxy and its Affect on Phillips Curve Nonlinearity: U.S. Evidence

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  • Derek Stimel

    (Menlo College)

Abstract

Using nonlinearity testing and modeling associated with the smooth transition regression model we examine how the choice of aggregate demand proxy affects, if at all, the nonlinearity of the Phillips curve. The three proxies we examine are the unemployment rate, output gap, and real unit labor costs. Our data is monthly from 1983-2008 for the U.S. We find that regardless of aggregate demand proxy examined, tests indicate a nonlinear Phillips curve. However, the dynamics of the nonlinear models vary substantially.

Suggested Citation

  • Derek Stimel, 2010. "Choice of Aggregate Demand Proxy and its Affect on Phillips Curve Nonlinearity: U.S. Evidence," Economics Bulletin, AccessEcon, vol. 30(1), pages 543-557.
    • Handle: RePEc:ebl:ecbull:eb-09-00801
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    More about this item

    Keywords

    Phillips curve; nonlinear model; smooth transition regression;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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