Scandinavian Working Papers in Economics

Working Papers,
Örebro University, School of Business

No 2018:6: A Note on the Stability of the Swedish Philips Curve

Sune Karlsson () and Pär Österholm ()
Additional contact information
Sune Karlsson: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Pär Österholm: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden

Abstract: We use Bayesian techniques to estimate bivariate VAR models for Swedish unemployment rate and inflation. Employing quarterly data from 1995Q1 to 2017Q3 and new tools for model selection, we compare a model with time-varying parameters and stochastic volatility to a specification with constant parameters and covar-iance matrix. We find strong evidence in favour of the specification with time-varying parameters and sto-chastic volatility. Our results indicate that the Swedish Phillips curve has not been stable over time. However, our findings do not suggest that the Phillips curve has been flatter in more recent years.

Keywords: Inflation; Unemployment; Time-varying parameters; Stochastic volatility

JEL-codes: C11; C32; E32

10 pages, March 14, 2018

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