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A Multiple Break Panel Approach To Estimating United States Phillips Curves

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  • Bill Russell
  • Anindya Banerjee
  • Issam Malki
  • Natalia Ponomareva

Abstract

Phillips curves are often estimated without due attention being paid to the underlying time series properties of the data. In particular, the consequences of inflation having discrete breaks in mean have not been studied adequately. We show by means of simulations and a detailed empirical example based on United States data that not taking account of breaks may lead to biased, and therefore spurious, estimates of Phillips curves. We suggest a method to account for the breaks in mean inflation and obtain meaningful and unbiased estimates of the short- and long-run Phillips curves in the United States.

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Bibliographic Info

Paper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 252.

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Length: 47 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:dun:dpaper:252

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

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References

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Cited by:
  1. J. James Reade & Ulrich Volz, 2011. "From the General to the Specific," Discussion Papers 11-18, Department of Economics, University of Birmingham.
  2. 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.
  3. Mariano Kulish & Adrian Pagan, 2013. "Issues in Estimating New-Keynesian Phillips Curves in the Presence of Unknown Structural Change," RBA Research Discussion Papers rdp2013-11, Reserve Bank of Australia.
  4. Nymoen, Ragnar & Rygh Swensen, Anders & Tveter, Eivind, 2011. "Interpreting the evidence for New Keynesian models of inflation dynamics," Memorandum 23/2011, Oslo University, Department of Economics.
  5. Russell, Bill & Chowdhury, Rosen Azad, 2013. "Estimating United States Phillips curves with expectations consistent with the statistical process of inflation," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 24-38.
  6. Jennifer L. Castle & Jurgen A. Doornik & David F. Hendry & Ragnar Nymoen, 2012. "Mis-specification Testing: Non-Invariance of Expectations Models of Inflation," Working Paper Series 50_12, The Rimini Centre for Economic Analysis.
  7. David Norman & Anthony Richards, 2012. "The Forecasting Performance of Single Equation Models of Inflation," The Economic Record, The Economic Society of Australia, vol. 88(280), pages 64-78, 03.
  8. Bill Russell, 2013. "Macroeconomics: science or faith based discipline?," Dundee Discussion Papers in Economics 276, Economic Studies, University of Dundee.

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