The long-run Phillips curve and non-stationary inflation

TY - JOUR

T1 - The long-run Phillips curve and non-stationary inflation

AU - Russell, Bill

AU - Banerjee, A.

PY - 2008

Y1 - 2008

N2 - Modern theories of inflation incorporate a vertical long-run Phillips curve and are usually estimated using techniques that ignore the non-stationary behaviour of inflation. Consequently, the estimates obtained are imprecise and unable to test the veracity of a vertical long-run Phillips curve. We estimate a Phillips curve model taking into account the non-stationary properties in inflation and identify a small but significant positive relationship between inflation and unemployment. The results also provide some evidence that the trade-off between inflation and the rate of unemployment in the short-run worsens as the mean rate of inflation increases. © 2007 Elsevier Inc. All rights reserved.

AB - Modern theories of inflation incorporate a vertical long-run Phillips curve and are usually estimated using techniques that ignore the non-stationary behaviour of inflation. Consequently, the estimates obtained are imprecise and unable to test the veracity of a vertical long-run Phillips curve. We estimate a Phillips curve model taking into account the non-stationary properties in inflation and identify a small but significant positive relationship between inflation and unemployment. The results also provide some evidence that the trade-off between inflation and the rate of unemployment in the short-run worsens as the mean rate of inflation increases. © 2007 Elsevier Inc. All rights reserved.

U2 - 10.1016/j.jmacro.2007.11.001

DO - 10.1016/j.jmacro.2007.11.001

M3 - Article

VL - 30

SP - 1792

EP - 1815

JO - Journal of Macroeconomics

JF - Journal of Macroeconomics

IS - 4

ER -