IDEAS home Printed from https://ideas.repec.org/a/vls/rojfme/v6y2018i1p55-62.html
   My bibliography  Save this article

The Rational Anticipations Regarding”Inflation - Unemployment” Trade-Off

Author

Listed:
  • DUTCAS, Monica Florica

    (Centre for Financial and Monetary Research “Victor Slavescu”, N.I.E.R., Romanian Academy, Bucharest, Romania)

Abstract

The paper starts from the premise that rational expectations theory invalidates the Philips Curve by demonstrating that monetary policy is long-term ineffective in terms of unemployment. The argument of the paper is the need to evaluate the trade-off inflation unemployment in the literature and how it verifies the precision of the Philips Curve model for better prediction of inflation and unemployment and their relationship. Identifying the Philips Curve is important when designing macroeconomic policy strategies on inflation, unemployment, economic growth, the shape of the curve being crucial to the direction of economic policy. Inflation and unemployment are structural components of market economy, each of them constitutes dangerous macroeconomic dis-equilibriums, and in the Romanian economic evolution, in certain periods, we can consider that each of them exhibited major threats for development and progress. Some conclusions are presented regarding the data which verify the short term Philips Curve model precision in order to show the signification of the relationship between inflation and unemployment on 1990 – 2017 period for Romania and the possible consequences on the strategic macroeconomic policies.

Suggested Citation

  • DUTCAS, Monica Florica, 2018. "The Rational Anticipations Regarding”Inflation - Unemployment” Trade-Off," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 6(1), pages 55-62, October.
  • Handle: RePEc:vls:rojfme:v:6:y:2018:i:1:p:55-62
    as

    Download full text from publisher

    File URL: http://www.icfm.ro/RePEc/vls/vls_pdf_jfme/vol6i1p55-62.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rudd, Jeremy & Whelan, Karl, 2005. "New tests of the new-Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1167-1181, September.
    2. repec:oup:ecpoli:v:21:y:2006:i:45:p:5-59 is not listed on IDEAS
    3. Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July.
    4. Albu, Lucian Liviu, 2004. "Estimating Nairu For The Romanian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 1(2), pages 5-19, May.
    5. Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas [‘The macroeconomics of low inflation’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(45), pages 6-59.
    6. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
    7. John M. Roberts, 1998. "Inflation expectations and the transmission of monetary policy," Finance and Economics Discussion Series 1998-43, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ieva Rubene & Paolo Guarda, 2004. "The new Keynesian Phillips curve: empirical results for Luxembourg," BCL working papers 11, Central Bank of Luxembourg.
    2. Sardor Sadykov, 2018. "Modelling Of Inflationary Processes In Uzbekistan On The Basis Of The New Keynesian Philips Curve," Economics and Management, Faculty of Economics, SOUTH-WEST UNIVERSITY "NEOFIT RILSKI", BLAGOEVGRAD, vol. 14(2), pages 72-99.
    3. Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2009. "Observed Inflation Forecasts and the New Keynesian Phillips Curve," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(3), pages 375-398, June.
    4. Sophocles N. Brissimis & Nicholas S. Magginas, 2008. "Inflation Forecasts and the New Keynesian Phillips Curve," International Journal of Central Banking, International Journal of Central Banking, vol. 4(2), pages 1-22, June.
    5. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2005. "A reappraisal of the inflation-unemployment tradeoff," European Journal of Political Economy, Elsevier, vol. 21(1), pages 1-32, March.
    6. Nunes, Ricardo, 2009. "Learning The Inflation Target," Macroeconomic Dynamics, Cambridge University Press, vol. 13(2), pages 167-188, April.
    7. Bec, Frédérique & Kanda, Patrick, 2020. "Is inflation driven by survey-based, VAR-based or myopic expectations? An empirical assessment from US real-time data," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    8. Mash, Richard, 2002. "New Keynesian Microfoundations Revisited: A Generalised Calvo-Taylor Model and the Desirability of Inflation vs. Price Level Targeting," Royal Economic Society Annual Conference 2002 138, Royal Economic Society.
    9. Christopher D. Carroll, 2001. "The Epidemiology of Macroeconomic Expectations," NBER Working Papers 8695, National Bureau of Economic Research, Inc.
    10. Sbordone, Argia M., 2002. "Prices and unit labor costs: a new test of price stickiness," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 265-292, March.
    11. Olivier Armantier & Wändi Bruine de Bruin & Giorgio Topa & Wilbert van der Klaauw & Basit Zafar, 2015. "Inflation Expectations And Behavior: Do Survey Respondents Act On Their Beliefs?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(2), pages 505-536, May.
    12. Paloviita, Maritta & Mayes, David, 2005. "The use of real-time information in Phillips-curve relationships for the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 16(3), pages 415-434, December.
    13. Henrik Jensen, 2002. "Targeting Nominal Income Growth or Inflation?," American Economic Review, American Economic Association, vol. 92(4), pages 928-956, September.
    14. Linde, Jesper, 2005. "Estimating New-Keynesian Phillips curves: A full information maximum likelihood approach," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1135-1149, September.
    15. Paul Hubert & Harun Mirza, 2019. "The role of forward‐ and backward‐looking information for inflation expectations formation," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 38(8), pages 733-748, December.
    16. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, 2014. "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 124-188, March.
    17. Richard Mash, 2003. "New Keynesian Microfoundations Revisited: A Calvo-Taylor-Rule-of-Thumb Model and Optimal Monetary Policy Delegation," Economics Series Working Papers 174, University of Oxford, Department of Economics.
    18. David Elkayam & Alex Ilek, 2009. "The information content of inflationary expectations derived from bond prices in Israel," Advances in Econometrics, in: Measurement Error: Consequences, Applications and Solutions, pages 61-89, Emerald Group Publishing Limited.
    19. Athanasios Orphanides & John Williams, 2004. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," NBER Chapters, in: The Inflation-Targeting Debate, National Bureau of Economic Research, Inc.
    20. Angelo M. Fasolo & Marcelo Savino Portugal, 2003. "Imperfect Rationality and Inflationary Inertia: a New Estimation of the Phillips Curve for Brazil," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] b34, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

    More about this item

    Keywords

    Rational expectations Theory; Philips Curve Model; inflation; unemployment; Romania;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vls:rojfme:v:6:y:2018:i:1:p:55-62. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniel Mateescu (email available below). General contact details of provider: https://edirc.repec.org/data/cfiarro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.