The Evolution of the U.S. Output-Inflation Tradeoff

Benjamin Wong

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper proposes quantifying the evolution of the U.S. output-inflation tradeoff using a Time-Varying Parameter Structural VAR. This methodology circumvents issues with existing methods which tend to be either reduced form in nature or rely on more ad hoc assumptions regarding sample split dates and both trend output and trend inflation. Working through U.S. data since the 1970s reveals only a slight change in the tradeoff from around 1.70 to 1.75 percentage points of real output growth per percentage point increase in trend inflation. This contrasts with claims that the U.S. Phillips Curve has flattened dramatically.

Keywords: Sacrifice Ratio; Time-Varying Parameters (search for similar items in EconPapers)
JEL-codes: C32 C54 E31 E66 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2013-10
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2013-70

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