Trend Inflation and the Nature of Structural Breaks in the New Keynesian Phillips Curve

Chang‐jin Kim, Pym Manopimoke and Charles Nelson

Journal of Money, Credit and Banking, 2014, vol. 46, issue 2-3, 253-266

Abstract: We show that with a unit root in inflation, the new Keynesian Phillips curve (NKPC) implies an unobserved components model with a stochastic trend component and an inflation gap. Our empirical results suggest that with an increase in trend inflation during the Great Inflation, the response of inflation to real economic activity decreases and the persistence of the inflation gap increases due to an increase in the persistence of the unobserved stationary component. These results are in line with the predictions of Cogley and Sbordone (), who show that the coefficients of the NKPC are functions of time‐varying trend inflation.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12105

Related works:
Working Paper: Trend Inflation and the Nature of Structural Breaks in the New Keynesian Phillips Curve (2013)
Working Paper: Trend Inflation and the Nature of Structural Breaks in the New Keynesian Phillips Curve (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:46:y:2014:i:2-3:p:253-266

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().