Ziel der Arbeit ist es den seit langem wissenschaftlich diskutierten Zusammenhang zwischen Inflation und Arbeitslosigkeit, die Phillips-Kurve, mit Hilfe neuer statistischer Methoden zu untersuchen und seine verschiedenen Ausprägungen bei den G7-Staaten miteinander zu vergleichen. Dabei werden zwei weitere Einflüsse, Produktivität und Inflationsklima, miteinbezogen.
Der erste Teil führt in die Diskussion der Phillips-Kurve ein. Im Folgenden werden die zur Analyse notwendigen Nichtparametrischen Verfahren vorgestellt und eingehend beschrieben. Die Analyse und der Vergleich der G7-Phillips-Kurven wird im vierten Kapitel durchgeführt. Im Anschluss daran folgt eine Zusammenfassung der Ergebnisse und ein Ausblick.
Table of Contents
1 Introduction
2 Remarks on the Phillips Curve
2.1 Historical Review
2.1.1 Phillips original curve and the time before
2.1.2 Lipsey’s excess demand and the first PC for the USA
2.1.3 The critiques and the failure of the curve
2.2 Summary of the Contemporary Debate - State of the Art
2.3 Discussion of Important PC Issues
2.3.1 Demand pull and cost push
2.3.2 Closed economy vs. open economy
2.3.3 Modeling two involved markets
2.3.4 Expectations
2.3.5 Proportional, derivative, and integral terms
2.3.6 Nonlinear behavior
2.3.7 Constant vs. time varying NAIRU
2.3.8 Other influences
2.4 Wage and Price Phillips Curves: The Empirical Framework
2.5 Issues to be Investigated
3 Semiparametric Regression
3.1 Some Introductory Words
3.2 Parametric Regression
3.2.1 Linear regression
3.2.2 Polynomial and nonlinear regression
3.3 Neighborhood Smoothing
3.3.1 Locally-weighted running line smoother
3.3.2 Kernel smoother
3.4 The Spline Smoothing Approach
3.4.1 Regression splines
3.4.2 Knot selection and a roughness penalty
3.4.3 Smoothing splines
3.4.4 Natural cubic splines
3.5 Additive Models
3.6 Choice of a Smoothing Model
3.6.1 Model selection
3.6.2 Automatic smoothing parameter selection
4 Analysis and Comparison of International Phillips Curves
4.1 Introduction
4.2 Preliminary Considerations
4.2.1 Seasonal adjusted data
4.2.2 The sense of multi-dimensionality
4.2.3 Wage-price spiral
4.2.4 The disregard of significant factors
4.3 The Data
4.4 Traditional 2D-view of the Two Markets
4.5 OLS Estimation of the Model Equations
4.6 Nonparametric Analysis: Fitting a GAM
4.7 Summary of the Results
5 Conclusion and Outlook
Goal and Research Focus
This thesis aims to investigate the Phillips curves of all G7 member states using nonparametric methodology, specifically building upon the theoretical framework of two interacting wage and price Phillips curves that account for the wage-price spiral and adaptive expectations.
- Application of nonparametric regression techniques (e.g., splines, GAMs) to Phillips curve modeling.
- Empirical analysis of the wage-price spiral across G7 nations.
- Investigation into potential nonlinearities and cross-country differences in macroeconomic behavior.
- Comparison of parametric (OLS) and nonparametric (GAM) models in explaining inflation and unemployment dynamics.
- Examination of the importance of factors like productivity growth and inflationary climate in macroeconomic modeling.
Excerpt from the Thesis
2.3.1 Demand pull and cost push
Two fairly often discussed sources of business cycle fluctuations, and therefore relevant to the Phillips curve discussion as well (cf. Phillips (1958)), are Demand pull and Cost push. The first refers to stimulated aggregate demand associated with, when positive, an increase in output (GDP) and a decrease in unemployment, caused for instance by a new fiscal policy. The second denotes a shift in the cost of production (input costs), affecting the aggregate supply side. Exemplary factors can be rising wages, higher taxes or higher import prices, e.g. when in an open economy prices of imported raw materials or goods become more expensive, often as a result of currency depreciation. The effects of such influences can be observed graphically in figure 2.4 (for a review of the theory see for instance the textbook of Blanchard (2003)).
Phillips’ (1958) first PC-equation contained the real economic parameter unemployment rate as a representative of demand pull and wage inflation as the nominal response variable. This is still the common central part for most of today’s PC-models, where often wage inflation is replaced by price inflation, assuming a one-to-one evolution of wages and prices. With respect to cost push, without explicitly including a measure of it into the wage inflation formula, Phillips took into consideration the percentage increase in the retail price index and the change in the index of import prices into consideration when explaining the behavior of the data. In this context he pointed toward the working of a wage-price spiral (cf. proceeding subsection).
Summary of Chapters
Introduction: Provides the context for macroeconomics at the turn of the century, introduces the Phillips curve concept, and outlines the research goal of applying nonparametric techniques to investigate G7 Phillips curves.
Remarks on the Phillips Curve: Discusses the historical evolution of the Phillips curve, contemporary debates, fundamental modeling issues like demand pull vs. cost push, and formally introduces the empirical wage and price framework used in the thesis.
Semiparametric Regression: Reviews statistical methodologies including linear, polynomial, and nonparametric regression techniques (smoothing splines, GAMs) that are utilized for the empirical analysis.
Analysis and Comparison of International Phillips Curves: Conducts an empirical study on G7 member states, comparing OLS and GAM estimation results, investigating nonlinearities, and providing a summary of the findings.
Conclusion and Outlook: Synthesizes the empirical results, confirms the significance of adaptive expectations and the wage-price spiral, and suggests directions for future research, particularly regarding seasonal influences.
Keywords
Phillips curve, G7, nonparametric regression, wage-price spiral, NAIRU, inflation, unemployment, GAM, smoothing splines, macroeconomics, adaptive expectations, productivity growth, business cycle, cost push, demand pull
Frequently Asked Questions
What is the primary objective of this thesis?
The thesis aims to apply nonparametric statistical methods to investigate the Phillips curves of all G7 countries, building upon existing theoretical frameworks to uncover nonlinearities and country-specific differences in inflation and unemployment behavior.
What are the central themes discussed in the work?
The work focuses on the historical and contemporary debate surrounding the Phillips curve, the role of the wage-price spiral, the distinction between open and closed economy models, and the importance of modeling both labor and commodity markets.
What research question does the paper address?
The central research inquiry is whether nonparametric methodology can provide superior insights into the Phillips curves of G7 nations compared to traditional parametric models, specifically regarding the functional form of these relationships.
Which scientific methods are employed?
The research uses both parametric (OLS) and nonparametric regression methods, including neighborhood smoothing, spline smoothing, and Generalized Additive Models (GAMs) implemented in R.
What topics are covered in the main section?
The main part of the thesis details the historical background of the Phillips curve, discusses critical components for inclusion in such models, derives a formal wage-price framework, and performs an extensive comparative empirical analysis for the G7 countries.
What are the most important keywords for this work?
Key terms include Phillips curve, G7, nonparametric regression, wage-price spiral, NAIRU, inflation, unemployment, and Generalized Additive Models (GAM).
Why are Japan and West-Germany highlighted in the analysis?
These countries are highlighted because the data reveals distinct seasonal patterns in their wage inflation behavior, which suggests that seasonal influences play a more significant role in these economies than is typically captured by standard models.
What conclusion does the author draw about the wage-price spiral?
The author concludes that the wage-price spiral works in both directions, noting that wages generally respond faster to price changes than prices respond to wage inflation across the G7 countries, thereby validating the need to model both markets separately.
- Quote paper
- Benjamin Kluge (Author), 2004, Nonparametric Estimation and Comparison of the G7 Phillips Curves, Munich, GRIN Verlag, https://www.grin.com/document/186478
