Flattening of the Phillips Curve and the Role of Oil Price: An Unobserved Components Model for the USA and Australia

Antonio Paradiso () and B. Rao

MPRA Paper from University Library of Munich, Germany

Abstract: We use the unobserved components model of Harvey (1989 and 2011) to estimate the Phillips curve (PC) for the USA and Australia, by augmenting it with oil prices. We found that the level coefficient of inflation and the coefficient of demand pressure have declined and contributed to the flattening of the Phillips curve. But the coefficient of oil prices has increased and has partly offset these effects. Therefore, oil prices are likely to play a significant role in future inflation rates.

Keywords: Unobserved components; Harvey; USA; Australia; Flattening of the Phillips curve and Oil prices (search for similar items in EconPapers)
JEL-codes: C12 C2 E3 (search for similar items in EconPapers)
Date: 2011-03-06
New Economics Papers: this item is included in nep-cba and nep-ene
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Related works:
Journal Article: Flattening of the Phillips curve and the role of the oil price: An unobserved component model for the USA and Australia (2012)
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