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The long-run Phillips curve and non-stationary inflation

Bill Russell () and Anindya Banerjee ()

Journal of Macroeconomics, 2008, vol. 30, issue 4, 1792-1815

Abstract: 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.

Keywords: Inflation; Unemployment; Long-run; Phillips; curve; Business; cycle; GMM (search for similar items in EconPapers)
Date: 2008
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Working Paper: The Long-Run Phillips Curve and Non-Stationary Inflation (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:30:y:2008:i:4:p:1792-1815

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