Asymmetry in the U.S. Output-Inflation Nexus
This paper presents empirical evidence supporting the proposition that there is a significant asymmetry in the U.S. output-inflation process. The important policy implication of this asymmetry is that it can be very costly if the economy overheats because this will necessitate a severe tightening in monetary conditions in order to re-establish inflation control. The empirical results presented in the paper show that the conclusions regarding asymmetry are robust to a number of tests for sensitivity to changes in the method used to estimate potential output and in the specification of the Phillips curve.
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Volume (Year): 43 (1996)
Issue (Month): 1 (March)
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