Dundee Discussion Papers in Economics 265: Estimating United States phillips curves with expectations consistent with the statistical process of inflation

Bill Russell, Rosen Azad Chowdhury

    Research output: Working paper/PreprintDiscussion paper

    Abstract

    ‘Modern’ Phillips curve theories predict inflation is an integrated, or near integrated, process. However, inflation appears bounded above and below in
    developed economies and so cannot be ‘truly’ integrated and more likely stationary around a shifting mean. If agents believe inflation is integrated as
    in the ‘modern’ theories then they are making systematic errors concerning the statistical process of inflation. An alternative theory of the Phillips curve
    is developed that is consistent with the ‘true’ statistical process of inflation. It is demonstrated that United States inflation data is consistent with the
    alternative theory but not with the existing ‘modern’ theories.
    Original languageEnglish
    PublisherUniversity of Dundee
    Number of pages35
    Publication statusPublished - 21 Apr 2012

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.265
    ISSN (Print)1473-236X

    Keywords

    • Phillips curve
    • Inflation
    • structural breaks
    • GARCH
    • Non-stationary data

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