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Discussion Paper Details

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Title: The Phillips Curve and the Lucas Critique: Some Historical Evidence

Author(s): George Alogoskoufis and Ron P Smith

Publication Date: June 1989

Keyword(s): Inflation, Lucas Critique, Phillips Curve and Unemployment

Programme Area(s): Applied Macroeconomics and International Macroeconomics

Abstract: This paper presents an investigation of the empirical significance of the Lucas Critique for the Phillips Curve. The investigation is carried out with annual historical time series for the United Kingdom (1857-1987) and the United States (1892-1987). The results, for two different models of the Phillips Curve, suggest that there are sizeable and statistically significant shifts in the parameters of wage equations when the process generating price inflation changes. The two major shifts that we identify coincide with the abandonment of the classical gold standard in 1914, and the disintegration of the Bretton Woods gold-dollar standard in the late 1960s.

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Bibliographic Reference

Alogoskoufis, G and Smith, R. 1989. 'The Phillips Curve and the Lucas Critique: Some Historical Evidence'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=321