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The long-run Phillips curve and non-stationary inflation

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  • Russell, Bill
  • Banerjee, Anindya

Abstract

Modern theories of inflation incorporate a vertical long-run Phillips curve and are usually estimated using techniques that ignore the non-stationary behaviour of inflation. Consequently, the estimates obtained are imprecise and unable to test the veracity of a vertical long-run Phillips curve. We estimate a Phillips curve model taking into account the non-stationary properties in inflation and identify a small but significant positive relationship between inflation and unemployment. The results also provide some evidence that the trade-off between inflation and the rate of unemployment in the short-run worsens as the mean rate of inflation increases.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 4 (December)
Pages: 1792-1815

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:4:p:1792-1815

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Inflation Unemployment Long-run Phillips curve Business cycle GMM;

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References

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Citations

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Cited by:
  1. Ahrens, Steffen & Snower, Dennis J., 2012. "Envy, Guilt, and the Phillips Curve," CEPR Discussion Papers 8796, C.E.P.R. Discussion Papers.
  2. Sacht, Stephen & Jang, Tae-Seok, 2012. "Identification of Animal Spirits in a Bounded Rationality Model: An Application to the Euro Area," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62071, Verein für Socialpolitik / German Economic Association.
  3. Bill Russell, 2007. "Non-Stationary Inflation and Panel Estimates of United States Short and Long-run Phillips curves," Dundee Discussion Papers in Economics 200, Economic Studies, University of Dundee.
  4. Islam, Faridul & Shahbaz, Muhammad & Shabbir, Muhammad, 2011. "Phillips curve in a small open economy: A time series exploration of North Cyprus," MPRA Paper 28397, University Library of Munich, Germany.
  5. Seip, Knut L. & McNown, Robert, 2013. "Monetary policy and stability during six periods in US economic history: 1959–2008: a novel, nonlinear monetary policy rule," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 307-325.
  6. Bill Russell & Anindya Banerjee & Issam Malki & Natalia Ponomareva, 2010. "A Multiple Break Panel Approach To Estimating United States Phillips Curves," Dundee Discussion Papers in Economics 232, Economic Studies, University of Dundee.
  7. Girardi, Riccardo & Paruolo, Paolo, 2013. "Wages and prices in Europe before and after the onset of the Monetary Union," Economic Modelling, Elsevier, vol. 35(C), pages 643-653.
  8. Rao, B. Bhaskara & Paradiso, Antonio & Esposito, Piero, 2011. "Non-stationary inflation and panel estimates of the n ew Keynesian Phillips curve for Australia," MPRA Paper 29242, University Library of Munich, Germany.
  9. Tiwari, Aviral Kumar & Oros, Cornel & Albulescu, Claudiu Tiberiu, 2014. "Revisiting the inflation–output gap relationship for France using a wavelet transform approach," Economic Modelling, Elsevier, vol. 37(C), pages 464-475.

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