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Evolving Post-World War II U.S. Inflation Dynamics

In: NBER Macroeconomics Annual 2001, Volume 16

  • Timothy Cogley
  • Thomas J. Sargent

This paper uses a nonlinear stochastic model to describe inflation-unemployment dynamics in the U.S. after World War II. The model is a vector autoregression with coefficients that are random walks with innovations that are arbitrarily correlated with each other and with innovations to the observables. The model enables us to detect features that have been emphasized in theoretical analyses of inflation-unemployment dynamics. Those analyses involve coefficient drift in essential ways.

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This chapter was published in:
  • Ben S. Bernanke & Kenneth Rogoff, 2002. "NBER Macroeconomics Annual 2001, Volume 16," NBER Books, National Bureau of Economic Research, Inc, number bern02-1, September.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11068.
    Handle: RePEc:nbr:nberch:11068
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    5. Robert J. Gordon, 1970. "The Recent Acceleration of Inflation and Its Lessons for the Future," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(1), pages 8-47.
    6. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
    7. Robert J. Gordon, 1996. "The Time-Varying NAIRU and its Implications for Economic Policy," NBER Working Papers 5735, National Bureau of Economic Research, Inc.
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    9. Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990. "Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence," NBER Working Papers 3510, National Bureau of Economic Research, Inc.
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    14. Uhlig, Harald, 1994. "What Macroeconomists Should Know about Unit Roots: A Bayesian Perspective," Econometric Theory, Cambridge University Press, vol. 10(3-4), pages 645-671, August.
    15. Ireland, Peter N., 1999. "Does the time-consistency problem explain the behavior of inflation in the United States?," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 279-291, October.
    16. Ray C. Fair, 1996. "Testing the Standard View of the Long-Run Unemployment-Inflation Relationship," Cowles Foundation Discussion Papers 1121, Cowles Foundation for Research in Economics, Yale University.
    17. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
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    19. Bennett T. McCallum, 1999. "Recent developments in the analysis of monetary policy rules," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
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