On the Nature and the Stability of the Canadian Phillips Curve
AbstractThis paper empirically determines why, during the 1990s, inflation in Canada was consistently more stable than predicted by the fixed-coefficients Phillips curve. A time-varying-coefficient model, where all the parameters adjust simultaneously, shows that the behaviour of expectations was probably a major contributing factor. A decrease in the value of the coefficient on the first difference of the output gap also seems to have influenced the observed pattern of inflation. Finally, pass-through of relative price shocks into domestic prices is shown to have been low since 1983.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 01-4.
Length: 30 pages
Date of creation: 2001
Date of revision:
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Business fluctuations and cycles; Econometric and statistical methods; Inflation and prices;
Find related papers by JEL classification:
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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- Lynda Khalaf & Maral Kichian, 2006. "Structural Change in Covariance and Exchange Rate Pass-Through: The Case of Canada," Working Papers 06-2, Bank of Canada.
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- Lynda Khalaf & Maral Kichian, 2003. "Testing the Stability of the Canadian Phillips Curve Using Exact Methods," Working Papers 03-7, Bank of Canada.
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