Short ‘test’about the ‘Norwegian Phillips curve’
Ragnar Nymoen
Department of Economics, UiO
25 August 2009
E3410/4410: eLecture 2
6
12.5
INF
U
5
10.0
4
7.5
3
5.0
2
2.5
1970
1980
1990
INF
12.5
2000
2010
× U
1970
1980
1990
INF
12.5
2000
2010
Fitted from semi-log
scatter, with four regression lines
10.0
10.0
7.5
7.5
5.0
5.0
2.5
2.5
2
3
4
5
6
1980
1990
E3410/4410: eLecture 2
2000
2010
The Norwegian Phillips curve (linear).
Sample period 1974-2008 and OLS gives,
t
= 5:0
0:4Ut
0:5Ut
1
+ 0:61
t 1
+ "t
where t is from CPI (headline, not CPI-AET) in‡ation in percent,
and Ut is the Labour force unemployment percentage.
1
What is the slope of the short-run Phillips curve according to
this model?
2
What is the slope of the long-run Phillips curve?
3
If Ut increases from 2 to 3 percent, what are the dynamic
e¤ects on t after 1, year, 4 years and in the long-run?
E3410/4410: eLecture 2
The Norwegian Phillips curve (semi-log).
A speci…cation with log-transformed rate of unemployment gives
t
= 6:2
1:0 ln Ut
2:5 ln Ut
1
+ 0:53
t 1
+ "t
1
What is @
2
What is the slope of the long-run Phillips curve when Ut is a)
2% , and b) 5% initially?
3
Compare the implied NAIRUs from the two estimated Phillips
curves.
t =@Ut
when Ut is a) 2%, and b) 5% initially?
E3410/4410: eLecture 2