Generalized Fama proxy hypothesis: Impact of shocks on Phillips curve and relation of stock returns with inflation
A generalized version of Fama's proxy hypothesis identifies a downward bias in Phillips curve estimations. The (spurious) negative relation between real stock returns and inflation emerges if output rate fluctuations dominate cyclical component fluctuations of a Lucas-type Phillips curve.
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- Jeffrey C. Fuhrer, 1995. "The Phillips curve is alive and well," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 41-56.
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