Nonlinearity and Structural Stability in the Phillips Curve: Evidence from Turkey

Mubariz Hasanov, Ayşen Araç () and Funda Telatar ()
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Mubariz Hasanov: Hacettepe University, Department of Economics

No 20123, Hacettepe University Department of Economics Working Papers from Hacettepe University, Department of Economics

Abstract: In this paper, we investigate possible nonlinearities in the inflation–output relationship in Turkey for the 1980–2008 period. We first estimate a linear bivariate model for the inflation rate and output gap, and test for linearity of the estimated model against nonlinear alternatives. Linearity test results suggest that the relationship between the inflation rate and output gap is highly nonlinear. We estimate a bivariate timevarying smooth transition regression model, and compute dynamic effects of one variable on the other by generalized impulse response functions. Computed impulse response functions indicate that inflation–output relationship in Turkey during the analyzed period was regime dependent and varied considerably across time.

Keywords: Phillips Curve; Nonlinearity; Structural Stability (search for similar items in EconPapers)
JEL-codes: C32 C51 E31 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2012
New Economics Papers: this item is included in nep-ara, nep-cba and nep-mac
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Related works:
Journal Article: Nonlinearity and structural stability in the Phillips curve: Evidence from Turkey (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hac:hacwop:20123

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