The medium-run Phillips curve: A time–frequency investigation for the UK

Abstract

The debate on the inflation–unemployment relationship has focused almost exclusively on the distinction between the “short-run” and “long-run” Phillips curves, while virtually ignoring the “middle” horizons. Using a historical perspective, we show that the UK wage Phillips curve is essentially a medium-run phenomenon. At the frequency range beyond business cycle frequencies, that is 8 to 16 years, there is significant evidence of a negative and stable relationship between money wage inflation and unemployment.