CONTEMPORARY CONCEPTS OF THE PHILLIPS CURVE AND MACROECONOMIC STABILIZATION POLICY

Владимир Михајловић, Гордана Марјановић

DOI Number
https://doi.org/10.22190/TEME180702037M
First page
519
Last page
532

Abstract


The stabilization of economic activity represents the basic purpose of macroeconomic policy. In the last few years, the achievement of price stability, or the relatively low and stable inflation rate, has been imposed as the policy’s main goal, in accordance with the recommendations of the so-called New consensus macroeconomics. In line with that, the identification of variables, which determine the inflation rate and cause its changes, is crucial. From its occurrence, the relationship of the Phillips curve provided an explanation of the inflation dynamics based on the movement of different factors, depending on the variant of the curve observed. Hence, the subject of the paper is the presentation and evaluation of the contemporary concepts of the Phillips curve in the context of the application of the efficient stabilization policy. The main objective of the paper is to reconsider the concept’s validity, especially in the conditions of serious economic disorders, such as the Great Recession. The applied analysis indicates that the dominant New Keynesian concept of the Phillips curve can serve for the successful conducting of economic policy, if it is supplemented with the variables of fiscal policy and financial stability policy.


Keywords

Phillips curve, economic policy, inflation rate, unemployment, Great Recession

Full Text:

PDF

References


Attinasi, M. G. & Klemm, A. (2014). The growth impact of discretionary fiscal policy measures. Working paper No. 1697, European Central Bank.

Basarac, M., Škrabić, B. & Sorić, P. (2011). The Hybrid Phillips Curve: Empirical Evidence form Transition Economies. Czech Journal of Economics and Finance. 61 (4), 367-383.

Batini, N., Jackson, B. & Nickell S. (2005). An open-economy new Keynesian Phillips Curve for the UK. Journal of Monetary Economics, 52 (6), 1061-1071. doi: https://doi.org/10.1016/j.jmoneco. 2005.08.003

Baug, P. Cappelen, A. & Swensen, A. R. (2011). The new Keynesian Phillips curve: Does if fit Norwegian data?. Discussion Paper No. 652, Statistics Norway, Oslo.

Bjørnstad, R., Nymoen, R. (2008). The New Keynesian Phillips curve tested on OECD panel data. Economics Discussion Papers, No. 2008-4, Institut für Weltwirtschaft.

Blaug, M. (1996). Economic theory in retrospect, Fifth Edition, Cambridge: Cambridge University Press.

Bludnik, I. (2009). The New Keynesianism – proclamation of a consensus?. Poznań University of Economics Review, Poznań, 9 (1), 5-24.

Calvo, G. (1983). Staggered Prices in a Utility-Maximizing Framework. Journal of Monetary Economics, 12 (3), 383-398. doi: 10.1016/0304-3932(83)90060-0

Carvalho Filho, de I. (2010). Inflation Targeting and the Crisis: An Empirical Assessment. IMF Working Paper WP/10/45.

Dahlhaus, T. (2014). Monetary Policy Transmission during Financial Crises: An Empirical Analysis. Bank of Canada Working Paper 2014-21.

Dufour J., Khalaf L. & Kichian, M. (2005). Inflation Dynamics and the New Keynesian Phillips Curve: An Identification-Robust Econometric Analysis. Bank of Canada Working Paper 2005-27, Ottawa.

Eller, J. & Gordon, R. (2003). Nesting the New Keynesian Phillips Curve within the mainstream model of US inflation dynamics. CEPR Conference: “The Phillips curve revisited”, Berlin, June 2003.

European Central Bank. (1999). The stability-oriented monetary policy of the Eurosystem. Monthly Bulletin, January 1999.

Fetai, B. (2017). The effects of fiscal policy during the financial crises in transition and emerging countries: does fiscal policy matter? Economic Research, 30 (1), 1522-1535. doi: https://doi.org/10.1080/1331677X.2017.1340181

Friedman, M. (1968). The Role of Monetary Policy. The American Economic Review, American Economic Association, 58 (1), 1-17.

Fuhrer, J. (1997). The (Un)Importance of Forward-Looking Behavior in Price Specifications. Journal of Money, Credit and Banking, 29 (3), 338-350. Stable URL: http://www.jstor.org/ stable/2953698

Galí, J. & Gertler, M. (1999). Inflation dynamics: A structural econometric analysis. Journal of Monetary Economics, 44 (2), 195-222. doi: 10.1016/S0304-3932(99)00023-9

Galí, J. (2000). The return of the Phillips curve and other recent developments in business cycle theory. Spanish Economic Review, Vol. 2, 1-10. doi: 10.1007/s101080050014

Gerlach, S. (2003). The ECB’s Two Pillars. CEPR Discussion Paper No. 3689, Centre for Economic Policy Research, London.

Gerlach-Kristen, P. (2006). A Two-Pillar Phillips Curve for Switzerland. Swiss National Bank Working Paper 2006-9, Zürich.

Guay, A. & Pelgrin, F. (2004). The U.S. New Keynesian Phillips Curve: An Empirical Assessment. Bank of Canada Working Paper 2004-35, Ottawa.

Laurens, B., Eckhold, K., King, D., Maehle, N., Naseer, A. & Durré, A. (2015). The Journey to Inflation Targeting: Easier Said than Done – The Case for Transitional Arrangements along the Road. IMF Working paper WP/15/136, International Monetary Fund, Washington.

Leith, C. & Malley, J. (2007). Estimated Open Economy New Keynesian Phillips Curves for the G7. Open Economies Review. 18 (4), 405-426. doi: 10.1007/s11079-007-9008-x

Lin, J. (2013). Against the Consensus: Reflections on the Great Recession. Cambridge: Cambridge University Press.

Lipsey, R. (1960). The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1862-1957: A Further Analysis. Economica, 27 (105), 496-513. doi: 10.2307/2551424

Masuch, K. Nicoletti-Altimari, S. Rostagno, M. & Pill, H. (2003). The role of money in monetary policymaking. BIS Papers, No. 19, Basel: Bank for International Settlements.

Phillips, A. (1958). The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957. Economica, 25 (100), 283-299. doi: 10.1111/j.1468-0335.1958.tb00003.x

Samuelson, P. & Solow, R. (1960). Analytical Aspects of Anti-Inflation Policy. American Economic Review, 50 (2), 177-194. Stable URL: http://www.jstor.org/stable/1815021

Schneider, S. & Harff, C. (2001). The two-pillar strategy of the ECB: a first assessment. Deutsche Bank Research, No. 92.

Sheffrin, S. (1996). Rational Expectations. Second Edition, Cambridge: Cambridge University Press.

Snower, D. & Karanassou, M.(2002). An Anatomy of the Phillips Curve. Discussion Paper No. 635, Bonn: Institute for the Study of Labor.

Spahn, H. P. (2007). Two-Pillar Monetary Policy and Bootstrap Expectations. Hohenheimer Diskussionsbeiträge, Nr. 282/2007, Institut für Volkswirtschaftslehre, Universität Hohenheim, Stuttgart.

Spilimbergo, A., Symansky, S., Blanchard, O. & Cottarelli, C. (2008). Fiscal Policy for the Crisis. IMF Staff Position Note, SPN/08/01, International Monetary Fund.

Tillmann, P. (2008) The New Keynesian Phillips curve in Europe: does it fit or does it fail?. Empirical Economics, Vol. 37, 463-473. doi: https://doi.org/10.1007/s00181-008-0241-y

Tsoulfidis, L. (2010). Competing Schools of Economic Thought. Berlin: Springer-Verlag.

Woodford, M. (2008). Does a „two-pillar Phillips curve“ justify a two-pillar monetary policy strategy?”, In: Beyer, A. & Reichlin, L. (Eds.). The Role of Money – Money and Monetary Policy in the Twenty-First Century, (pp. 56-82), Germany: European Central Bank.

Woodford, M. (2012). Inflation Targeting and Financial Stability. NBER Working Paper No. 17967, Cambridge: National Bureau of Economic Research.




DOI: https://doi.org/10.22190/TEME180702037M

Refbacks



Print ISSN: 0353-7919
Online ISSN: 1820-7804