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Contracting models of the Phillips curve empirical estimates for middle-income countries

  • Agénor, Pierre-Richard
  • Bayraktar, Nihal

This paper provides empirical estimates of contracting models of the Phillips curve for eight middle-income developing countries (Chile, Colombia, Korea, Malaysia, Mexico, Morocco, Tunisia, and Turkey). Following an analytical review, a variety of models with one and more leads and lags are estimated using two-step GMM techniques. Nested and non-nested tests are used to select a specification for each country, and in-sample predictive capacity and stability are analyzed. Higher-dimension models tend to perform better than parsimonious models with one lead and one lag. Except for Colombia and Korea, backward-looking behavior has a relatively larger impact on inflation dynamics. World oil prices and relative input prices have a limited effect, whereas borrowing costs are significant for Korea and Mexico.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 2 (June)
Pages: 555-570

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:2:p:555-570
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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