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Non-Stationary Inflation and Panel Estimates of United States Short and Long-run Phillips curves

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  • Bill Russell

Abstract

This paper argues that because United States inflation has been nonstationary over the past 5 decades the body of empirical research that proceeds assuming explicitly or implicitly that inflation is stationary with constant mean is largely invalid. Using 50 years of US inflation data the standard results in the Phillips curve literature are shown to be due to unaccounted shifts in the mean rates of inflation over the period. We then proceed to estimate short and long-run Phillips curves for the United States using time series panel data techniques which account for these shifts in mean.

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Bibliographic Info

Paper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 200.

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Length: 43 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:dun:dpaper:200

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Keywords: Phillips curve; inflation; panel data; non-stationary data;

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References

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Cited by:
  1. Filiz Yesilyurt & J. Elhorst, 2014. "A regional analysis of inflation dynamics in Turkey," The Annals of Regional Science, Springer, vol. 52(1), pages 1-17, January.
  2. Paradiso, Antonio & Rao, B. Bhaskara, 2012. "Flattening of the Phillips curve and the role of the oil price: An unobserved component model for the USA and Australia," Economics Letters, Elsevier, vol. 117(1), pages 259-262.
  3. Nymoen, Ragnar & Swensen, Anders Rygh & Tveter, Eivind, 2012. "Interpreting the evidence for New Keynesian models of inflation dynamics," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 253-263.
  4. Bill Russell & Anindya Banerjee & Issam Malki & Natalia Ponomareva, 2010. "A Multiple Break Panel Approach to Estimating United States Phillips Curves," Discussion Papers 10-14, Department of Economics, University of Birmingham.
  5. Bill Russell, 2013. "ARCH and structural breaks in United States inflation," Dundee Discussion Papers in Economics 277, Economic Studies, University of Dundee.
  6. Russell, Bill & Banerjee, Anindya, 2008. "The long-run Phillips curve and non-stationary inflation," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1792-1815, December.
  7. Bill Russell & Rosen Azad Chowdhury, 2012. "Estimating United States Phillips Curves With Expectations Consistent With The Statistical Process Of Inflation," Dundee Discussion Papers in Economics 265, Economic Studies, University of Dundee.
  8. Romain Bouis & Ane Kathrine Christensen & Boris Cournède, 2013. "Deleveraging: Challenges, Progress and Policies," OECD Economics Department Working Papers 1077, OECD Publishing.
  9. Bill Russell, 2013. "Macroeconomics: science or faith based discipline?," Dundee Discussion Papers in Economics 276, Economic Studies, University of Dundee.

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