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Non-stationary inflation and panel estimates of United States short and long-run Phillips curves

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  • Russell, Bill

Abstract

This paper argues that because United States inflation has been non-stationary over the past five decades the vast body of empirical research that proceeds without adequately accounting for the non-stationarity in the data is invalid. Using 50 years of United States inflation data the standard results in the Phillips curve literature are shown to be due to unaccounted shifts in the mean rates of inflation over the period. Short and long-run Phillips curves for the United States are then estimated using time series panel data techniques that account for these shifts in mean.

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  • Russell, Bill, 2011. "Non-stationary inflation and panel estimates of United States short and long-run Phillips curves," Journal of Macroeconomics, Elsevier, vol. 33(3), pages 406-419, September.
  • Handle: RePEc:eee:jmacro:v:33:y:2011:i:3:p:406-419
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    Cited by:

    1. Bill Russell & Dooruj Rambaccussing, 2016. "Breaks and the Statistical Process of Inflation: The Case of the ‘Modern’ Phillips Curve," Dundee Discussion Papers in Economics 294, Economic Studies, University of Dundee.
    2. Bill Russell, 2014. "ARCH and structural breaks in United States inflation," Applied Economics Letters, Taylor & Francis Journals, pages 973-978.
    3. Russell, Bill & Chowdhury, Rosen Azad, 2013. "Estimating United States Phillips curves with expectations consistent with the statistical process of inflation," Journal of Macroeconomics, Elsevier, pages 24-38.
    4. Mauro Bambi, 2006. "Endogenous growth and time to build: the AK case," Computing in Economics and Finance 2006 77, Society for Computational Economics.
    5. Russell, Bill & Banerjee, Anindya, 2008. "The long-run Phillips curve and non-stationary inflation," Journal of Macroeconomics, Elsevier, pages 1792-1815.
    6. Bill Russell & Anindya Banerjee & Issam Malki & Natalia Ponomareva, 2010. "A Multiple Break Panel Approach To Estimating United States Phillips Curves," Dundee Discussion Papers in Economics 232, Economic Studies, University of Dundee.
    7. Romain Bouis & Ane Kathrine Christensen & Boris Cournède, 2013. "Deleveraging: Challenges, Progress and Policies," OECD Economics Department Working Papers 1077, OECD Publishing.
    8. Russel, Bill, 2015. "'Modern' Phillips Curves and the Implications For The Statistical Process of Inflation," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-84, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Russell, Bill, 2013. "Macroeconomics: Science or Faith Based Discipline?," SIRE Discussion Papers 2013-114, Scottish Institute for Research in Economics (SIRE).
    10. Chen, Shyh-Wei & Hsu, Chi-Sheng, 2016. "Threshold, smooth transition and mean reversion in inflation: New evidence from European countries," Economic Modelling, Elsevier, vol. 53(C), pages 23-36.
    11. Filiz Yesilyurt & J. Elhorst, 2014. "A regional analysis of inflation dynamics in Turkey," The Annals of Regional Science, Springer;Western Regional Science Association, pages 1-17.
    12. Nymoen, Ragnar & Swensen, Anders Rygh & Tveter, Eivind, 2012. "Interpreting the evidence for New Keynesian models of inflation dynamics," Journal of Macroeconomics, Elsevier, pages 253-263.
    13. Bill Russell, 2015. "‘Modern’ Phillips Curves And The Implications For The Statistical Process Of Inflation," Dundee Discussion Papers in Economics 289, Economic Studies, University of Dundee.
    14. 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.
    15. Shyh-Wei Chen & Chi-Sheng Hsu & Cyun-Jhen Pen, 2016. "Are Inflation Rates Mean-reverting Processes? Evidence from Six Asian Countries," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 12(1), pages 119-155, February.

    More about this item

    Keywords

    Phillips curve Inflation Panel data Non-stationary data;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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