Asymmetry in the U.S. Output-Inflation Nexus

Peter Clark, Douglas Laxton and David Rose
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Peter Clark: International Monetary Fund
David Rose: International Monetary Fund

IMF Staff Papers, 1996, vol. 43, issue 1, 216-251

Abstract: This paper presents empirical evidence supporting the proposition that there is a significant asymmetry in the U.S. output-inflation process. The important policy implication of this asymmetry is that it can be very costly if the economy overheats because this will necessitate a severe tightening in monetary conditions in order to re-establish inflation control. The empirical results presented in the paper show that the conclusions regarding asymmetry are robust to a number of tests for sensitivity to changes in the method used to estimate potential output and in the specification of the Phillips curve.

JEL-codes: C51 E31 E52 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (41)

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