,
Lo
fOt.
~
,.-
o(es
fA
c,
, If
It
,
,..,
a~
;>,
..a
During the 1960s, Canadian
rates of inilation seemed to lie
along a Phillips curve. Inflation
rose and unemployment fell
fairly steadily during this
decade, and policymakers had
apparently decided to live with
higher inflation in order to
reduce unemployment.
Source:Adapted from the following: Unemploymentrate:Historical
Statistics of Canada, Series0233;
Inflationrate,1960-61: Calculated
using GNP deflator, Historical
Statistics of Canada, SeriesK17;
1961-69: Calculated using GOP
deflator,StatisticsCanadaCANSIM
II, seriesv1997756.
~
~
1:,0
6
1966
5
a;
••'~"
='-'
4
.;:;
.po
<::
t::
....:;
3
2
The figure shows the combinations of inflation and unemployment
experienced
in
Canada each year from 1970
to 2006. Unlike the situation
during
the
1960s
(see
Figure 13.1), after 1970, the
relationship between inflation
and unemployment seemed to
change from what it had been
in the 19605.
Source:Adapted from the following: Unemploymentrate,1970-75:
Historical Statistics of Canada,
Series0233; 197&-2006:Statistics
Canada CANSh'v\ II, series
v2461224;Inflationrate:Calculated
usingGDPdeflator,Statis',jcs
Canada
CANSIMII, seriesv1997756.
_:t
_
9
10
11
12
Unemployment rate (percentage)
p ",.
C.,v
1 ~I
\
Pit\- "
o.c2~1
-
~
re
,.
.~
•.... \ "- -••.,,~.
l\A-~')
n • ~ .~,)
\
fila
N.~c.t. ~ ~
'" I 0 I
Figure
14.7
The expectationsaugmented Phillips
QJrve in Ci,lnada.
1963=1997
The exp@ctations-augm@nt@dPhillips curve is a
negative relationship between unanticipated inflation and cyclical unemployment. The figure shows
this relationship for the
years 1963 to 1997 in
Canada. Unanticipated inflation equals actual inflation minus expected
inflation, where expected
inflation in any year is
measured here as the average inflation rate for the
preceding two years.
Cyclical unemployment
for each year is the actual
unemployment rate minus
an estimate of the natural
unemployment rate for
that year (see Fig. 14.9).
Note that years in which
unanticipated inflation is
high usually are years in
which cyclical unemployment is low.
Source: unemployment rate,
1963-1965: Historical Statistics of
Canada, Series D233; 1966-1997:
Canadian Economic Observer,
Historical Statistical Supplement,
of
Table 8; natural rate
unemployment: see Fig. 14.9; (PI
inflation rate: Canadian Economic
Observer, Historical Statistical
Supplement. Table 12.
.1981
-,I
.2~~~5
1 •
1965
.1969
1964
1967
•
.19
1970·
-1
1988.
.1979
1995
•
.1980
1963
•
1111996
.1990
1987
.1997
.1977
.1986
·1971
1994
-2
11985
•
1993
.1984
-3
-
·1982
-4
-5
-
-6
-1.5
-1.0
-0.5
1.0
1.5
2.0
2.5
3.0
Cyclical unemployment rate (percent)
Tl~
V
3.5
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