Is the Phillips Curve in India Dead, Inert and Stirring to Lif | Money Purse {మనీ పర్స్ }
Is the Phillips Curve in India Dead, Inert and Stirring to Life or Alive and Well?
The Phillips curve postulates that unemployment can be lowered (output can be increased) but only at the cost of higher wages (inflation) or conversely, wage growth (inflation) can be lowered only at the cost of higher unemployment (lower output). The conduct of monetary policy hinges around this exploitable trade-off. Our results indicate that the Phillips curve is alive in India but recovering from a period of flattening over the past 6 years. The Phillips curve is convex, flattening with low and negative output gaps and steepening when the output gap is positive and high.
In 1958, Alban William Housego Phillips detected a strong negative association between the money wage rate and the unemployment rate in the UK. His published work was to become one of the most widely cited ever in the economics profession1. What started out as an ‘empirical regularity’ without theoretical moorings was to become the most famous curve in the post-World War II period – the Phillips curve – as extraordinary as the man himself for whom a short historical tribute would be befitting
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