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La courbe de Phillips au Canada : un examen de quelques hypothèses

  • Jean-François Fillion
  • André Léonard
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    This study, which draws on a variety of research on price dynamics in Canada, examines some hypotheses that might explain the poor quality of recent inflation forecasts based on the conventional Phillips curve. Among the various explanations we consider for the persistent underestimation of inflation, the one that emerges most clearly from our findings is that the process by which inflation expectations are formed has changed in recent years. Shifts in expectations appear to have been influenced by monetary policy developments. To take account of this factor, we estimate a Phillips curve that incorporates four autoregressive regimes based on the results of a Markov-switching model. We find that when regimes are introduced, the Phillips curve produces accurate forecasts for inflation since 1991.

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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/05/wp97-3.pdf
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    Paper provided by Bank of Canada in its series Working Papers with number 97-3.

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    Length: 38 pages
    Date of creation: 1997
    Date of revision:
    Handle: RePEc:bca:bocawp:97-3
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    1. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
    2. Doug Hostland, 1995. "CHANGES IN THE INFLATION PROCESS IN CANADA: Evidence and Implications," Macroeconomics 9508001, EconWPA.
    3. Douglas Laxton & Peter B. Clark & David Rose, 1995. "Asymmetry in the U.S. Output-Inflation Nexus; Issues and Evidence," IMF Working Papers 95/76, International Monetary Fund.
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