On Inflation and the Persistence of Shocks to Output
This paper empirically investigates the possibility that the effects of shocks to output depend on the level of inflation. The analysis extends Elwood’s (1998) framework by incorporating in the model an inflation-threshold process that can potentially influence the stochastic properties of output. The value of this threshold parameter, if it exists, is considered to be unknown and is estimated in the model. The results indicate that shocks to output indeed have asymmetric effects, depending on the level of inflation: negative shocks are more detrimental when inflation is high, and positive shocks are more persistent when inflation is low.
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| Length: | 29 pages |
| Date of creation: | 2001 |
| Date of revision: | |
| Handle: | RePEc:bca:bocawp:01-22 |
| Contact details of provider: | Postal: Phone: 613 782-8845 Fax: 613 782-8874 Web page: http://www.bank-banque-canada.ca/
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Donald W.K. Andrews, 1990.
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Cowles Foundation Discussion Papers
943, Cowles Foundation for Research in Economics, Yale University.
- Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
- John B. Taylor, 1998. "Monetary policy and the long boom," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
- Campbell, John Y & Mankiw, N Gregory, 1987.
"Are Output Fluctuations Transitory?,"
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- Campbell, John & Mankiw, Gregory, 1987. "Are Output Fluctuations Transitory?," Scholarly Articles 3122545, Harvard University Department of Economics.
- Elwood, S. Kirk, 1998. "Is the persistence of shocks to output asymmetric?," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 411-426, April.
- Hansen, B.E., 1991.
"Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis,"
RCER Working Papers
296, University of Rochester - Center for Economic Research (RCER).
- Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
- Potter, Simon M, 1995.
"A Nonlinear Approach to US GNP,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 10(2), pages 109-25, April-Jun.
- Simon M. Potter, 1993. "A Nonlinear Approach to U.S. GNP," UCLA Economics Working Papers 693, UCLA Department of Economics.
- Clark, Peter K, 1987. "The Cyclical Component of U.S. Economic Activity," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 797-814, November.
- Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
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