An examination of U.S. Phillips curve nonlinearity and its relationship to the business cycle
AbstractWe test for and model nonlinearity of the reduced-form U.S. Phillips curve using the smooth transition regression (STR) framework. We find evidence of two regimes: a “high inflation regime” associated with fast rising food and energy prices and a “low inflation regime” associated with slower rising or falling food and energy prices. This suggests that the U.S. Phillips curve varies asymmetrically over the business cycle. Particularly, the U.S. Phillips curve has a tendency to shift in and flatten towards the end of expansion periods and in recessions. This result implies that the non-accelerating inflation rate of unemployment (NAIRU) varies over the short-run or business cycle.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 29 (2009)
Issue (Month): 2 ()
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Find related papers by JEL classification:
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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- Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S119-36, Suppl. De.
- Alvaro Escribano & Oscar Jorda, .
"Improved Testing And Specification Of Smooth Transition Regression Models,"
Department of Economics
97-26, California Davis - Department of Economics.
- Oscar Jorda & Alvaro Escribano, 2003. "Improved Testing And Specification Of Smooth Transition Regression Models," Working Papers 9726, University of California, Davis, Department of Economics.
- Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 297-346.
- Janet L. Yellen & George A. Akerlof, 2006. "Stabilization Policy: A Reconsideration," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 1-22, January.
- repec:ebl:ecbull:v:30:y:2010:i:1:p:543-557 is not listed on IDEAS
- Derek Stimel, 2010. "Choice of Aggregate Demand Proxy and its Affect on Phillips Curve Nonlinearity: U.S. Evidence," Economics Bulletin, AccessEcon, vol. 30(1), pages 543-557.
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