Abstract
Phillips curves are often estimated without due attention being paid to the underlying time series properties of the data. In particular, the consequences of inflation having discrete breaks in mean have not been studied adequately. We show by means of simulations and a detailed empirical example based on
United States data that not taking account of breaks may lead to biased, and therefore spurious, estimates of Phillips curves. We suggest a method to account for the breaks in mean inflation and obtain meaningful and unbiased estimates of the short- and long-run Phillips curves in the United States.
United States data that not taking account of breaks may lead to biased, and therefore spurious, estimates of Phillips curves. We suggest a method to account for the breaks in mean inflation and obtain meaningful and unbiased estimates of the short- and long-run Phillips curves in the United States.
| Original language | English |
|---|---|
| Publisher | University of Dundee |
| Number of pages | 47 |
| Publication status | Published - Jun 2011 |
Publication series
| Name | Dundee Discussion Papers in Economics |
|---|---|
| Publisher | University of Dundee |
| No. | 252 |
| ISSN (Print) | 1473-236X |
Keywords
- Phillips curve
- Inflation
- Panel data
- Non-stationary data
- Breaks