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Derek Stimel
''Choice of Aggregate Demand Proxy and its Affect on Phillips Curve Nonlinearity: U.S. Evidence''
( 2010, Vol. 30 No.1 )
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.
Keywords: Phillips curve, nonlinear model, smooth transition regression
C3 - Time-Series Models
Manuscript Received : Dec 21 2009 Manuscript Accepted : Feb 16 2010

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