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Testing for Asymmetry in the Inflation-Unemployment Trade-off: Some Evidence for the USA

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  • Miguel St. Aubyn

Abstract

Two sources of asymmetry in the Phillips curve are considered: the "capacity constraint hypothesis" and downward rigidity on wages and/or prices. The short run trade-off between inflation changes and the unemployment gap is modeled in a state-space framework that allows for time variation in both the NAIRU and the trade-off parameter. Empirical evidence for the US using the Kalman filter favors convexity of the Phillips curve, the trade-off depending positively on the unemployment gap and on inflation changes. The two sources of asymmetry produce almost equivalent observational models, so it is not possible to distinguish one from the other.

Suggested Citation

  • Miguel St. Aubyn, 2000. "Testing for Asymmetry in the Inflation-Unemployment Trade-off: Some Evidence for the USA," Working Papers Department of Economics 2000/05, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp52000
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    References listed on IDEAS

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    Cited by:

    1. Mario Nigrinis Ospina, 2004. "Es lineal la Curva de Phillips en Colombia?," Borradores de Economia 282, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    Phillips curve; Kalman filter; state-space models; NAMU;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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