IDEAS home Printed from
   My bibliography  Save this article

Shocking Escapes


  • Bruce McGough


Sargent's (1999) model of inflation is amended to include real oil prices and used to study the impact of exogenous supply shocks on the inflation time-series. We analyse whether these shocks can trigger escape-like episodes. We consider unobserved permanent shocks to the natural rate of unemployment and observed permanent shocks to the mean real oil price. Favourable shocks to unemployment decrease the time to first escape; that is, escapes tend to occur much sooner in the presence of these shocks. Shocks to the mean real oil price cause the economy to move quickly to its new equilibrium. Copyright 2006 Royal Economic Society.

Suggested Citation

  • Bruce McGough, 2006. "Shocking Escapes," Economic Journal, Royal Economic Society, vol. 116(511), pages 507-528, April.
  • Handle: RePEc:ecj:econjl:v:116:y:2006:i:511:p:507-528

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. Anderson, Evan W. & McGrattan, Ellen R. & Hansen, Lars Peter & Sargent, Thomas J., 1996. "Mechanics of forming and estimating dynamic linear economies," Handbook of Computational Economics,in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 4, pages 171-252 Elsevier.
    2. Thomas Sargent & Noah Williams & Tao Zha, 2009. "The Conquest of South American Inflation," Journal of Political Economy, University of Chicago Press, vol. 117(2), pages 211-256, April.
    3. In-Koo Cho & Noah Williams & Thomas J. Sargent, 2002. "Escaping Nash Inflation," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 1-40.
    4. Song Chen, 2000. "Probability Density Function Estimation Using Gamma Kernels," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 52(3), pages 471-480, September.
    5. Williams, Noah, 2004. "Small noise asymptotics for a stochastic growth model," Journal of Economic Theory, Elsevier, vol. 119(2), pages 271-298, December.
    6. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1, March.
    7. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. William Branch & George W. Evans, 2007. "Model Uncertainty and Endogenous Volatility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(2), pages 207-237, April.
    2. Mitra, Kaushik & Evans, George W. & Honkapohja, Seppo, 2013. "Policy change and learning in the RBC model," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 1947-1971.
    3. Ellison, Martin & Yates, Tony, 2007. "Escaping Nash and Volatile Inflation," CEPR Discussion Papers 6483, C.E.P.R. Discussion Papers.
    4. Ellison, Martin & Scott, Andrew, 2013. "Learning and price volatility in duopoly models of resource depletion," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 806-820.
    5. Sohrab Rafiq, 2014. "What Do Energy Prices Tell Us About UK Inflation?," Economica, London School of Economics and Political Science, vol. 81(322), pages 293-310, April.
    6. Federico di Pace & Kaushik Mitra & Shoujian Zhang, 2014. "Adaptive Learning and Labour Market Dynamics," CDMA Working Paper Series 201408, Centre for Dynamic Macroeconomic Analysis.
    7. William A. Branch & George W. Evans, 2011. "Learning about Risk and Return: A Simple Model of Bubbles and Crashes," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 159-191, July.
    8. Alina Barnett & Martin Ellison, 2013. "Learning by Disinflating," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(4), pages 731-746, June.
    9. Branch, William A., 2016. "Imperfect knowledge, liquidity and bubbles," Journal of Economic Dynamics and Control, Elsevier, vol. 62(C), pages 17-42.
    10. Martin Ellison & Liam Graham & Jouko Vilmunen, 2006. "Strong Contagion with Weak Spillovers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 263-283, April.
    11. Christopher G. Gibbs, 2017. "Forecast combination, non-linear dynamics, and the macroeconomy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(3), pages 653-686, March.
    12. Kolyuzhnov, Dmitri & Bogomolova, Anna & Slobodyan, Sergey, 2014. "Escape dynamics: A continuous-time approximation," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 161-183.
    13. Chakraborty, Avik & Evans, George W., 2008. "Can perpetual learning explain the forward-premium puzzle?," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 477-490, April.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:116:y:2006:i:511:p:507-528. 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.