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Unobserved Component Models of the Phillips Relation in the ASEAN Economy

Warapong Wongwachara () and Anusorn Minphimai ()
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Anusorn Minphimai: Fiscal Policy Research Institute, Thailand

Journal of Economics and Management, 2009, vol. 5, issue 2, 241-256

Abstract: The subject of this paper is the estimation of the Phillips relation ¡V the inflation-output gap tradeoff ¡V for ASEAN countries. Unobserved component (UC) models are employed in order to extract the output gap from GDP data. We also obtain stylised facts on macroeconomic cycles namely, (i) that the average cyclical period for output is approximately four years, and (ii) that the output movement leads that of investment. The inflation equation is then estimated as part of a bivariate model that includes an equation for GDP; the lagged output gaps enter the inflation equation as additional explanatory variables. The evidence for the significant relationship between the output gap and inflation in ASEAN appears to be very weak.

Keywords: unobserved component model; Phillips relation; output gap; ASEAN (search for similar items in EconPapers)
JEL-codes: C22 C32 E31 E32 (search for similar items in EconPapers)
Date: 2009
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