The Phillips curve is a relationship in macroeconomics between the inflation rate (inf)and the unemployment rate (ur). Estimating the Phillips curve using quarterly data for the United States from 1962:I to 1995:IV, you find $\widehat{\text { Inf t}}$ = 4.08 + 0.118 ur_t, R²= 0.003, SER = 3.148
(1.11)(0.176)
(a)Explain why, at first glance, this is a surprising result.
(b)Do you think that there is omitted variable bias in the regression?
(c)What other threats to internal validity may be present?
(d)If you could find a proper specification for the Phillips curve using United States data, what external validity criteria would you suggest?

Question

The Phillips curve is a relationship in macroeconomics between the inflation rate (inf)and the unemployment rate (ur). Estimating the Phillips curve using quarterly data for the United States from 1962:I to 1995:IV, you find

\widehat{\text { Inf t}}

= 4.08 + 0.118 ur_t, R²= 0.003, SER = 3.148
(1.11)(0.176)
(a)Explain why, at first glance, this is a surprising result.
(b)Do you think that there is omitted variable bias in the regression?
(c)What other threats to internal validity may be present?
(d)If you could find a proper specification for the Phillips curve using United States data, what external validity criteria would you suggest?

Quizplus · Accepted Answer

The Answer of The Phillips curve is a relationship in macroeconomics between the inflation rate (inf)and the unemployment rate (ur). Estimating the Phillips curve using quarterly data for the United States from 1962:I to 1995:IV, you find $\widehat{\text { Inf t}}$ = 4.08 + 0.118 ur_t, R²= 0.003, SER = 3.148 (1.11)(0.176) (a)Explain why, at first glance, this is a surprising result. (b)Do you think that there is omitted variable bias in the regression? (c)What other threats to internal validity may be present? (d)If you could find a proper specification for the Phillips curve using United States data, what external validity criteria would you suggest?

The Phillips Curve Is a Relationship in Macroeconomics Between the Inflation