The Phillips Curve – The Case of Indian Data

Abstract

The paper uses three different estimates of the output gaps to obtain estimates of the Phillips curve on the basis of
the Indian data. We use a modified Hodrick-Prescott filter with a non constant smoothing parameter. We allow the
smoothing parameter ï¬ to vary over time so that its value reflects the nature and magnitude of supply and demand
shocks in India, although determining the exact value still remains a problem.
Keywords: Box-Cox method, Hodrick- Prescott filter, Phillips Curve, Potential output.