ARCH and structural breaks in United States inflation

Bill Russell (Lead / Corresponding author)

    Research output: Contribution to journalArticle

    2 Citations (Scopus)
    228 Downloads (Pure)

    Abstract

    United States Phillips curves are routinely estimated without accounting for the shifts in mean inflation. As a result, we may expect the standard estimates of Phillips curves to be biased and suffer from auto-regressive conditional heteroscedasticity (ARCH). We demonstrate this is indeed the case. We also demonstrate that once the shifts in mean inflation are accounted for, the ARCH is largely eliminated in the estimated model and the model defining expected rate of inflation in the New Keynesian model plays no significant role in the dynamics of inflation.
    Original languageEnglish
    Pages (from-to)973-978
    Number of pages6
    JournalApplied Economics Letters
    Volume21
    Issue number14
    Early online date9 Apr 2014
    DOIs
    Publication statusPublished - 2014

    Keywords

    • Philips curve
    • ARCH
    • structural breaks
    • inflation
    • markup
    • C22
    • E31

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