Measuring macroeconomic performance through a non-parametric Taylor curve

Sergio Destefanis

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Recently, frontier techniques have been utilised in the measurement of countries' macroeconomic performance by constructing a "production set" where the outputs are some macroeconomic indicators, while the inputs collapse to a unit scalar. In the present study, a different approach is proposed. The trade-off between the variability of inflation and of the level of activity (often defined as the Taylor Curve) is posited as the relevant policy frontier. This frontier is estimated through non-parametric techniques on a sample of 19 OECD countries during the 1960-99 period. There seems to be a definite role for cost-shocks, as well as for some supply-side characteristics, in shifting the variability trade-off. Also, the relative shadow price of the variability of inflation increases over time. Countries appear on the whole to have become slightly more efficient, but their performance has worsened, because the frontier has shifted upwards.

Keywords: inflation-output variability trade-off; labour market rigidities; policy efficiency (search for similar items in EconPapers)
JEL-codes: E24 J63 J64 J65 (search for similar items in EconPapers)
Date: 2003-04-02
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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