Flattening of the Phillips Curve and the Role of Oil Price: An Unobserved Components Model for the USA and Australia
AbstractWe use the unobserved components model of Harvey (1989 and 2011) to estimate the Phillips curve (PC) for the USA and Australia, by augmenting it with oil prices. We found that the level coefficient of inflation and the coefficient of demand pressure have declined and contributed to the flattening of the Phillips curve. But the coefficient of oil prices has increased and has partly offset these effects. Therefore, oil prices are likely to play a significant role in future inflation rates.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29606.
Date of creation: 06 Mar 2011
Date of revision:
Unobserved components; Harvey; USA; Australia; Flattening of the Phillips curve and Oil prices;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-CBA-2011-03-26 (Central Banking)
- NEP-ENE-2011-03-26 (Energy Economics)
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