Estimated Trade-Offs Between Unemployment and Inflation
(311 K)
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NBER Working Paper No. 1377
Issued in June 1984
NBER Program(s): EFG
Three models of price and wage behavior are estimated and tested in this paper. Model 1 is one in which the long-run trade-off between unemployment and inflation is in terms of price levels; Model 2 is one in which the trade-off is in terms of rates of change; and Model 3 is one in which there is no long-run trade-off. The evidence favors Model 1 over Models 2 and 3. The comparison between Models 2 and 3 is inconclusive. The short-run trade-offs are greater for Model 1 than for Models 2 and 3. The fact that Model 3 did not do particularly well is evidence against the Friedman-Phelps proposition of no long-run trade-off.
Published: Fair, Ray C. "Estimated Trade-Offs Between Unemployment and Inflation." Price Stability and Public Policy, Federal Reserve Bank of Kansas City, August 2-3, 1984, pp. 57-81..
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