A Spectral Representation of the Phillips Curve in Australia

We document evolving patterns in the inflation-unemployment relationship in Australia in the frequency domain under different monetary policy regimes and labor market regulations. The RBA adopted monetary targeting in 1976 and inflation targeting in 1993. There were important changes in the labor relations during mid-1980s-mid-1990s. We document an upward sloping medium-run Phillips curve in the pre-1977 period, a downward sloping long-run Phillips curve during 1977-1993, and a flattened Phillips curve from 1993 onwards. Inflation lags unemployment during the first period but leads during the second period. The Phillips curve at business-cycle frequencies is downward sloping in all periods. Similar patterns are also observed in several industrialized countries that adopted inflation targeting.