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Inflation Dynamics And The Output‐Inflation Trade‐Off: International Panel Data Evidence

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  • Dimitrios Bakas
  • Georgios Chortareas

Abstract

We explore the impact of inflation and its variability on the output‐inflation trade‐off using a single‐step approach in a panel data context. Previous empirical approaches focus on either cross‐country or country‐by‐country time‐series analyses. We employ a dynamic heterogeneous panel specification using an all‐encompassing estimation framework accounting for parameter heterogeneity, cross‐sectional dependence, dynamics, and nonstationarity. Our sample covers 60 countries from 1970 to 2010. While inflation variability reduces the trade‐off for specific periods and country groups, an unambiguous and more pronounced negative relation emerges between the inflation rate and the trade‐off. The findings are consistent with the New Keynesian view. (JEL E31, E12, C23)

Suggested Citation

  • Dimitrios Bakas & Georgios Chortareas, 2019. "Inflation Dynamics And The Output‐Inflation Trade‐Off: International Panel Data Evidence," Economic Inquiry, Western Economic Association International, vol. 57(4), pages 2110-2124, October.
    • Handle: RePEc:bla:ecinqu:v:57:y:2019:i:4:p:2110-2124
    DOI: 10.1111/ecin.12798
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    Cited by:

    1. Sim, Chong Yang, 2021. "A Review on Output-Inflation Trade-off Based on New Classical and New Keynesian Theories," MPRA Paper 105767, University Library of Munich, Germany.
    2. Magkonis, Georgios & Zekente, Kalliopi-Maria, 2020. "Inflation-output trade-off: Old measures, new determinants?," Journal of Macroeconomics, Elsevier, vol. 65(C).

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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