Estimating United States Phillips Curves With Expectations Consistent With The Statistical Process Of Inflation
Bill Russell () and
Rosen Azad Chowdhury
No 2012-13, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)
â€˜Modernâ€™ Phillips curve theories predict inflation is an integrated, or near integrated, process. However, inflation appears bounded above and below in developed economies and so cannot be â€˜trulyâ€™ integrated and more likely stationary around a shifting mean. If agents believe inflation is integrated as in the â€˜modernâ€™ theories then they are making systematic errors concerning the statistical process of inflation. An alternative theory of the Phillips curve is developed that is consistent with the â€˜trueâ€™ statistical process of inflation. It is demonstrated that United States inflation data is consistent with the alternative theory but not with the existing â€˜modernâ€™ theories.
Keywords: Phillips curve; inflation; structural breaks; GARCH; nonstationary data (search for similar items in EconPapers)
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Journal Article: Estimating United States Phillips curves with expectations consistent with the statistical process of inflation (2013)
Working Paper: ESTIMATING UNITED STATES PHILLIPS CURVES WITH EXPECTATIONS CONSISTENT WITH THE STATISTICAL PROCESS OF INFLATION (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:316
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