7. The Phillips curve is a relationship between the inflation rate (inf) and the unemployment rate (ur). Estimating the Phillips curve using data for the United States from 1962 to 1995, you find Infi= 4.11 +0.132 urţ, R2 = 0.003, SER = 3.148 (1.11) (0.176) (a) What does Phillips curve say about the relationship between the inflation rate and the unemployment rate (You learned it in the Principles of Macroeconomics course, you can also google it)? Does the estimated coefficient seem right to you?

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7. The Phillips curve is a relationship between the inflation rate (inf) and the unemployment rate (ur).
Estimating the Phillips curve using data for the United States from 1962 to 1995, you find
Infi= 4.11 +0.132 urț, R2 = 0.003, SER = 3.148
(1.11) (0.176)
(a) What does Phillips curve say about the relationship between the inflation rate and the unemployment
rate (You learned it in the Principles of Macroeconomics course, you can also google it)? Does the estimated
coefficient seem right to you?
(b) Do you think that there is omitted variable bias in the regression? Write down a few important omnitted
variables.
(c) What other threats to intermal validity may be present in this example?
Transcribed Image Text:• Saved to this PC - o Search (Alt+Q) nces Mailings Review View Help viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing 7. The Phillips curve is a relationship between the inflation rate (inf) and the unemployment rate (ur). Estimating the Phillips curve using data for the United States from 1962 to 1995, you find Infi= 4.11 +0.132 urț, R2 = 0.003, SER = 3.148 (1.11) (0.176) (a) What does Phillips curve say about the relationship between the inflation rate and the unemployment rate (You learned it in the Principles of Macroeconomics course, you can also google it)? Does the estimated coefficient seem right to you? (b) Do you think that there is omitted variable bias in the regression? Write down a few important omnitted variables. (c) What other threats to intermal validity may be present in this example?
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