Abstract
In a recent paper Hvidding [5] derived some interesting policy implications of a non-linear Phillips curve when the unemployment rate is a random variable. Hvidding’s analysis focussed on the following model:where p is the current inflation rate, u is the unemployment rate, p* is the expected inflation rate and a, b and c are constants. The influence of uncertainty in this model manifests itself in the expected value of u-1. For this Hvidding used an approximation suggested by Mood, Graybill and Boes ([6] page 181).
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