Advanced Search
MyIDEAS: Login to save this paper or follow this series

Trend, cycle, and non-linear trade-off in the Euro Area 1970-2001

Contents:

Author Info

  • Alvaro Aguiar

    ()
    (CEMPRE, Faculdade de Economia da Universidade do Porto)

  • Manuel M. F. Martins

    ()
    (CEMPRE, Faculdade de Economia da Universidade do Porto)

Abstract

This paper presents new tests and estimates of the Phillips trade-off in the Euro Area, carried out in a unobserved components model with possibly non-linear Phillips and Okun relations, using quarterly aggregate data for the period 1970:I-2001:II. A concept of forward-looking near-rational expectations is introduced in the model, improving on the contradiction between rational expectations and evidence of inflation inertia. The Phillips curve turns out to be linear and its trade-off statistically significant, while non-linearity shows up in the Okun relation. The trend-cycle decompositions capture the main features of the Euro Area recent macroeconomic record.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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.fep.up.pt/investigacao/workingpapers/wp122.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 122.

as in new window
Length: 45 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:por:fepwps:122

Contact details of provider:
Postal: Rua Dr. Roberto Frias, 4200 PORTO
Phone: 351-22-5571100
Fax: 351-22-5505050
Email:
Web page: http://www.fep.up.pt/
More information through EDIRC

Related research

Keywords: Trend and cycle; Unobserved-components; Kalman filter; Phillips curve; Okun law; Near-rational expectations.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Laurence Ball, 2000. "Near-rationality and inflation in two monetary regimes," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco.
  2. Olivier Blanchard & Francesco Giavazzi, 2001. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," NBER Working Papers 8120, National Bureau of Economic Research, Inc.
  3. Laurence Ball & N. Gregory Mankiw, 1992. "Asymmetric Price Adjustment and Economic Fluctuations," NBER Working Papers 4089, National Bureau of Economic Research, Inc.
  4. Ball, Laurence, 1994. "Credible Disinflation with Staggered Price-Setting," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 282-89, March.
  5. Apel, Mikael & Jansson, Per, 1999. "A theory-consistent system approach for estimating potential output and the NAIRU," Economics Letters, Elsevier, Elsevier, vol. 64(3), pages 271-275, September.
  6. Laurence Ball, 1996. "Disinflation and the NAIRU," NBER Working Papers 5520, National Bureau of Economic Research, Inc.
  7. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  8. Mikael Apel & Per Jansson, 1999. "System estimates of potential output and the NAIRU," Empirical Economics, Springer, Springer, vol. 24(3), pages 373-388.
  9. Laurence Boone, 2000. "Comparing Semi-Structural Methods to Estimate Unobserved Variables: The HPMV and Kalman Filters Approaches," OECD Economics Department Working Papers 240, OECD Publishing.
  10. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  11. Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, Elsevier, vol. 40(1), pages 15-32, January.
  12. P Clark & D Laxton, 1997. "Phillips Curves," CEP Discussion Papers, Centre for Economic Performance, LSE dp0344, Centre for Economic Performance, LSE.
  13. Akerlof, George A & Yellen, Janet L, 1985. "A Near-rational Model of the Business Cycle, with Wage and Price Intertia," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(5), pages 823-38, Supp..
  14. Camba-Méndez, Gonzalo & Rodriguez-Palenzuela, Diego, 2001. "Assessment criteria for output gap estimates," Working Paper Series, European Central Bank 0054, European Central Bank.
  15. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 708-20, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sandra Silva, 2004. "On evolutionary technological change and economic growth: Lakatos as a starting point for appraisal," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 139, Universidade do Porto, Faculdade de Economia do Porto.
  2. Maria do Rosario Correia & Scott C. Linn & Andrew Marshall, 2004. "An Empirical Investigation of Debt Contract Design: The Determinants of the Choice of Debt Terms in Eurobond Issues," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 148, Universidade do Porto, Faculdade de Economia do Porto.
  3. Ana Paula Delgado & Isabel Maria Godinho, 2004. "The evolution of city size distribution in Portugal: 1864-2001," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 151, Universidade do Porto, Faculdade de Economia do Porto.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:por:fepwps:122. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.