The Phillips Curve, the Persistence of Inflation, and the Lucas Critique: Evidence from Exchange-Rate Regimes: Comment
The purpose of this comment is to demonstrate that their theoretical result concerning the first order derivative of relative inflation persistence with respect to the degree of accommodation is incorrect. As a consequence, the sign of the first derivative becomes ambiguous. We provide an economic explanation of this result, elaborating on the three distinct transmission mechanisms in the AS (relative) model. Moreover, we propose an economically meaningful modification of the original AS model that restores a strictly positive relation between exchange rate accommodation and relative inflation persistence.
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Volume (Year): 90 (2000)
Issue (Month): 1 (March)
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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.:
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- Maria Demertzis & Andrew Hughes Hallett, 1996. "Regional Inequalities and the Business Cycle: An Explanation of the Rise in European Unemployment," Regional Studies, Taylor & Francis Journals, vol. 30(1), pages 15-29.
- Dornbusch, Rudiger, 1982. "PPP Exchange-Rate Rules and Macroeconomic Stability," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 158-165, February.
- Hamid Faruqee & Douglas Laxton & Bart Turtelboom & Peter Isard & Eswar S Prasad, 1998. "Multimod Mark III; The Core Dynamic and Steady State Model," IMF Occasional Papers 164, International Monetary Fund.
- Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
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