EconPapers    
Economics at your fingertips  
 

Anticipated Inflation, the Frequency of Transactions, and the Slope of the Phillips Curve

Zvi Hercowitz ()

No 518, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the effects of expected inflation on the responsiveness of output to nominal disturbances in the framework of a localized markets model. The mechanism described in the theoretical part of the paper is that expected inflation has a positive effect on the transaction frequency, which in turn increases the flow of price information across markets. More information implies less misperception of monetary shocks as relative shifts in excess demand, resulting in lower sensitivity of real output to these socks. The empirical implication of this proposition -- namely ,that expected inflation reduces the coefficient of nominal shocks in an output equation -- is tested first using data across countries, and then with time series data from the United States. The first test uses Lucas's and Alberro's estimates of Phillips Curve coefficients from different countries and the corresponding average inflation rates. The second test involves data from the post-World War II period. It uses nominal rates of return on Treasury Bills and corporate bonds as measures of anticipated inflation and Barro's estimates of unanticipated money. In general, results in both tests provide support (stronger than expected)for the implication of the theory.

Date: 1980-07
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published as Journal of Money, Credit and Banking, Vol. 15, no. 2 (1983): 139-154.

Downloads: (external link)
http://www.nber.org/papers/w0518.pdf (application/pdf)

Related works:
Journal Article: Anticipated Inflation, the Frequency of Transactions, and the Slope of the Phillips Curve (1983) Downloads
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:nbr:nberwo:0518

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w0518

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-03-29
Handle: RePEc:nbr:nberwo:0518