How Nonlinear Is Peru´s Phillips Curve?
By Andrew R. Garcia ; Marco Vega
December 2025
Language: English
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Keywords
- inflation
- Kolmogorov-Arnold networks
- Phillips Curve
Abstract
This article applies Kolmogorov-Arnold Networks (KANs) to uncover and interpret functional forms of the Phillips curve. Our findings indicate that the Phillips curve may exhibit nonlinearity; however, this nonlinearity does not stem from the relationship between inflation and economic activity or the unemployment rate—as is commonly assumed in the literature—but rather from the relationship between exchange rate variations and inflation. Although this contrasts with much of the existing research, which emphasizes nonlinearity through the output gap or unemployment rate, we do not rule out the possibility of linearity. Both linear and nonlinear dynamics are evident in the data.