Economics at your fingertips  

Testing the Stability of the Canadian Phillips Curve Using Exact Methods

Lynda Khalaf () and Maral Kichian

Staff Working Papers from Bank of Canada

Abstract: Postulating two different specifications for the Canadian Phillips curve (a purely backwardlooking model, and a partly backward-, partly forward-looking model), the authors test for structural breaks in the parameters of the equation. In each case, they account for the possibilities that: (i) breaks can be discrete, or continuous, and (ii) available data samples may be too small to justify using asymptotically valid structural-change tests. Thus, the authors use recent testing procedures that are valid in finite samples, applying the Dufour-Kiviet (1996) methodology for discrete-type breaks, and the Dufour (2002) Maximized Monte Carlo test method for continuous-type shifts. The second test accounts for nuisance parameters that appear only under the alternative. The proposed alternative is a Kalman-filter-based time-varying-parameter specification, with coefficients that follow random walks. The authors find evidence for linear and non-linear breaks, the latter being characterized by continuous and unpredictable-type shifts in the inflation-dynamics coefficients.

Keywords: Econometric; and; statistical; methods (search for similar items in EconPapers)
JEL-codes: C15 C52 E31 E37 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2003
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)

Related works:
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:

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

Page updated 2023-01-25
Handle: RePEc:bca:bocawp:03-7