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Using a CGE Model to Identify the Policy Trade-Off between Unemployment and Inflation: The Efficient Phillips Curve

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André García, Francisco Javier and Lima, Carmen M. and Cardenete, M. Alejandro (2012) Using a CGE Model to Identify the Policy Trade-Off between Unemployment and Inflation: The Efficient Phillips Curve. Economic Systems Research, 24 (04). pp. 349-369. ISSN 1469-5758

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Abstract

This paper provides a new reading of a classical economic relation: the short-run Phillips curve. Our point is that, when dealing with inflation and unemployment, policy-making can be understood as a multicriteria decisionmaking problem. Hence, we use so-called multiobjective programming in connection with a computable general equilibrium (CGE) model to determine the combinations of policy instruments that provide efficient combinations of inflation and unemployment. This approach results in an alternative version of the Phillips curve labelled as efficient Phillips curve. Our aim is to present an application of CGE models to a new area of research that can be especially useful when addressing policy exercises with real data. We apply our methodological proposal within a particular regional economy, Andalusia, in the south of Spain. This tool can give some keys for policy advice and policy implementation in the fight against unemployment and inflation.


Item Type:Article
Uncontrolled Keywords:Short-run Phillips curve; Multicriteria decision-making; Computable general equilibrium model; Efficient policies; Multiobjective programming.
Subjects:Social sciences > Economics > Regional economics
Social sciences > Economics > Economic indicators
Social sciences > Economics > Macroeconomics
ID Code:38252
Deposited On:18 Oct 2016 10:33
Last Modified:18 Oct 2016 11:55

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