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Flattening of the Phillips curve and the role of the oil price: An unobserved component model for the USA and Australia

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  • Paradiso, Antonio
  • Rao, B. Bhaskara

Abstract

We used the unobserved component model of Harvey (1989, 2011) to estimate the Phillips curve for the USA and Australia, augmenting it with the oil price. Our results show that while the coefficient of demand pressure and the intercept decreased, the coefficient of the oil price increased. Therefore, the oil price is likely to play a significant role in future inflation rates.

Suggested Citation

  • Paradiso, Antonio & Rao, B. Bhaskara, 2012. "Flattening of the Phillips curve and the role of the oil price: An unobserved component model for the USA and Australia," Economics Letters, Elsevier, vol. 117(1), pages 259-262.
    • Handle: RePEc:eee:ecolet:v:117:y:2012:i:1:p:259-262
    DOI: 10.1016/j.econlet.2012.05.022
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    Cited by:

    1. Mallick, Debdulal, 2019. "Policy regimes and the shape of the Phillips curve in Australia," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1077-1094.
    2. de Mendonça, Helder Ferreira & Garcia, Pedro Mendes, 2023. "Effects of oil shocks and central bank credibility on price diffusion," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 304-317.
    3. Mallick, Debdulal, 2014. "A Spectral Representation of the Phillips Curve in Australia," MPRA Paper 59794, University Library of Munich, Germany.
    4. Luca Agnello & Vítor Castro & Ricardo M. Sousa, 2023. "Interest rate gaps in an uncertain global context: why “too” low (high) for “so” long?," Empirical Economics, Springer, vol. 64(2), pages 539-565, February.
    5. Víctor López-Pérez, 2017. "Do professional forecasters behave as if they believed in the New Keynesian Phillips Curve for the euro area?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(1), pages 147-174, February.

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    More about this item

    Keywords

    Unobserved component model; USA; Australia; Flattening Phillips curve; Oil price;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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