Modeling The Philips Curve: A Time-Varying Volatility Approach
This paper examines the Phillips curve relationship when the second moment of inflation is nonlinear. Specifically, we estimate GARCH models that provide evidence consistent with Keynesian-type models that imply output "overshooting" and inflation fluctuations following aggregate demand shocks. Additionally, the evidence suggests that an increase in the conditional variability of inflation leads to higher levels of inflation.
Volume (Year): 3 (2003)
Issue (Month): 2 ()
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References listed on IDEAS
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- Patricia Reagan & Rene M. Stulz, 1993.
"Contracting costs, inflation, and relative price variability,"
Federal Reserve Bank of Cleveland, pages 585-611.
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- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July. Full references (including those not matched with items on IDEAS)
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