The Long-Run Phillips Curve is... a Curve

Guido Ascari, Paolo Bonomolo and Qazi Haque

No 213, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: In U.S. data, inflation and output are negatively related in the long run. A Bayesian VAR with stochastic trends generalized to be piecewise linear provides robust reduced-form evidence in favor of a threshold level of trend inflation of around 4%, below which potential output is independent of trend inflation, and above which, instead, potential output is negatively affected by trend inflation. Moreover, this negative relationship is quite substantial: above the threshold every percentage point increase in trend inflation is related to about 1% decrease in potential output per year. A New Keynesian model generalized to admit time-varying trend inflation and estimated via particle filtering provides theoretical foundations to this reduced-form evidence. The structural long-run Phillips Curve implied by the estimated New Keynesian model is not statistically different from the one implied by the reduced-form piecewise linear BVAR model.

Keywords: Long-Run Phillips Curve, Inflation, Bayesian VAR, DSGE; Particle Filter. (search for similar items in EconPapers)
JEL-codes: C32 C51 E30 E31 E52 (search for similar items in EconPapers)
Pages: 56
Date: 2023-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://economiaemanagement.dip.unipv.it/sites/dip10/files/2022-12/DEMWP0213.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: The Long-Run Phillips Curve is... a Curve (2024)
Working Paper: The Long-Run Phillips Curve is... a Curve (2023)
Working Paper: The Long-Run Phillips Curve is... a Curve (2023)
Working Paper: The Long-Run Phillips Curve is... a Curve (2023)
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:pav:demwpp:demwp0213

Access Statistics for this paper

More papers in DEM Working Papers Series from University of Pavia, Department of Economics and Management Contact information at EDIRC.
Bibliographic data for series maintained by Alice Albonico ( this e-mail address is bad, please contact ).