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Unobserved Component Models of the Phillips Relation in the ASEAN Economy

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  • Warapong Wongwachara

    (Faculty of Economics and Politics, University of Cambridge, UK)

  • Anusorn Minphimai

    ()
    (Fiscal Policy Research Institute, Thailand)

Abstract

The subject of this paper is the estimation of the Phillips relation ¡V the inflation-output gap tradeoff ¡V for ASEAN countries. Unobserved component (UC) models are employed in order to extract the output gap from GDP data. We also obtain stylised facts on macroeconomic cycles namely, (i) that the average cyclical period for output is approximately four years, and (ii) that the output movement leads that of investment. The inflation equation is then estimated as part of a bivariate model that includes an equation for GDP; the lagged output gaps enter the inflation equation as additional explanatory variables. The evidence for the significant relationship between the output gap and inflation in ASEAN appears to be very weak.

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Bibliographic Info

Article provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.

Volume (Year): 5 (2009)
Issue (Month): 2 (July)
Pages: 241-256

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Handle: RePEc:jec:journl:v:5:y:2009:i:2:p:241-256

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Related research

Keywords: unobserved component model; Phillips relation; output gap; ASEAN;

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  1. Harvey, A.C. & Trimbur, T.M. & van Dijk, H.K., 2005. "Trends and cycles in economic time series: A Bayesian approach," Econometric Institute Research Papers EI 2005-27, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Bautista, Carlos C., 2003. "Estimates of output gaps in four Southeast Asian countries," Economics Letters, Elsevier, vol. 80(3), pages 365-371, September.
  3. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Fumitaka Furuoka, 2007. "Does the “Phillips Curve” Really Exist? New Empirical Evidence from Malaysia," Economics Bulletin, AccessEcon, vol. 5(16), pages 1-14.
  5. Harvey, A C, 1985. "Trends and Cycles in Macroeconomic Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 216-27, June.
  6. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
  7. Harvey, Andrew C & Koopman, Siem Jan, 1992. "Diagnostic Checking of Unobserved-Components Time Series Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 377-89, October.
  8. repec:ebl:ecbull:v:5:y:2007:i:16:p:1-14 is not listed on IDEAS
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