On the empirical relevance of the Lucas supply curve. (A note)

Claude Bismut and Ismael Ramajo
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Claude Bismut: CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier
Ismael Ramajo: CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier

CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro

Abstract: In this paper we extend the usual Lucas supply curve to allow the likely external influence on inflation, together with domestic conditions. We test the relationship between the inflation surprise, the output gap and the real exchange rate using simple time series regressions on annual data for a list of 16 developed countries. These tests confirm the empirical relevance of the Lucas supply curve but also support the assumption that part of the inflation surprise may come from unexpected variations of the real exchange rate.

Keywords: inflation surprise imported inflation; output gap; natural rate of unemployment; Lucas supply curve (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-mac
Note: View the original document on HAL open archive server: https://hal.science/hal-01954918v1
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpceem:hal-01954918

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