A wavelets-based analysis of the phillips curve hypothesis for the Brazilian economy, 1980-2011

Abstract

This paper implements a wavelets-based analysis of the Phillips curve hypothesis as formulated by Friedman and Phelps for the Brazilian economy, concerning the last thirty years. We provide an introductory discussion on Phillips curve's main arguments and an exploratory data analysis for the variables under consideration: prices, unemployment and real wages. In the sequel, we estimate variances and correlation structures between these aggregates through wavelets. Our findings reject the Phillips curve hypothesis for the Brazilian economy in the short run while suggest that it does hold in the long run. Finally, the correlation structure obtained in the paper captures particular aspects of Brazilian economic policy within the period.