The US Wage Phillips Curve across Frequencies and over Time


  • The authors thank two anynomous referees for their valuable comments and suggestions, as well as participants at the International workshop on Advances in Macrodynamics, Bielefeld, 28–29 July, 2007 and the Annual Latin American Meeting of the Econometric Society, Rio de Janeiro, 20–22 November, 2008. The empirical analysis was carried out using R (see R Development Core Team, 2008).


Although widely used in many areas of applied sciences, wavelet analysis has not fully entered the economic discipline yet. In this article we apply wavelet analysis to one of the most investigated relationships is in empirical macroeconomics: the relationship between wage inflation and unemployment. Using US postwar data we find a frequency-dependent relationship of a sort that is consistent with Phillips’ original insights. It also turns out that this relationship is remarkably stable over the 1948–93 period, but not in the aftermath, as a consequence of a process of adaption of the wage formation process to a low inflation environment.