This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Investigating the structural stability of the Phillips curve relationship

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Groen, Jan J J () (Federal Reserve Bank of New York)
Mumtaz, Haroon () (Bank of England)

Additional information is available for the following registered author(s):

Abstract

The reduced-form correlation between inflation and measures of real activity has changed substantially for the main developed economies over the post-WWII period. In this paper we attempt to describe the observed inflation dynamics in the United Kingdom, the United States and the euro area with a sequence of New Keynesian Phillips Curve (NKPC) equations that are log-linearised around different, non-zero, steady-state inflation levels. In doing this, we follow a two-step estimation strategy. First, we model the time variation in the relationship between inflation and a real cost-based measure of activity through a Markov-switching vector autoregressive model. We then impose the cross-equation restrictions of a Calvo pricing-based NKPC under non-zero steady-state inflation and estimate the structural parameters by minimising for each inflation state the distance between the restricted and unrestricted vector autoregressive parameters. The structural estimation results indicate that for all the economies there is evidence for a structurally invariant NKPC, albeit with a significant backward-looking component.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bankofengland.co.uk/publications/workingpapers/wp350.pdf
File Format: application/pdf
File Function: Full text
Download Restriction: no

Publisher Info
Paper provided by Bank of England in its series Bank of England working papers with number 350.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 48 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:boe:boeewp:0350

Contact details of provider:
Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Email:
Web page: http://www.bankofengland.co.uk/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Publications Group).

Related research
Keywords: New Keynesian Phillips Curve; trend inflation; Markov-switching VAR; minimum distance estimation.;

This paper has been announced in the following NEP Reports:

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
  1. Jan J. J. Groen & George Kapetanios, 2008. "Revisiting useful approaches to data-rich macroeconomic forecasting," Staff Reports 327, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? IDEAS also covers the most complete directory of Economics departments and institutes, EDIRC.

This page was last updated on 2009-11-27.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.