Search results

Several Phillips curve models are presented and estimated with Chilean annual data for 1963–1982. Because of unreliable unemployment statistics, the real wage level is used to represent labour market disequilibrium. The Cortázar‐Marshall inflation index, alternative to the official one, and four different earnings variables are used. Equilibrium levels of earnings and equilibrium differentials are obtained. Market forces, expected inflation, structural change after 1973, and exogenous elements represented by a trend are all statistically significant; government‐determined minimum wage rates and union membership are not. There is no evidence of partial adjustment, and all equilibrium differentials increased during the period.

This paper sets out to investigate whether the four members of the common monetary area (CMA) regime experience similar inflation-unemployment dynamics as explained by the Phillips Curve phenomenon.

This study uses a combination of seemingly unrelated regression (SUR) and Copula based marginal regression techniques to investigate existence of a common Phillips curve (PC) between members of the CMA. Model estimation was done using country specific annual time series data for inflation, unemployment and imports spanning from 1980 to 2014.

We find evidence of contemporaneous correlation between the residuals of individual CMA PC equations and a statistically significant trade-off between inflation and unemployment for all CMA countries. Wald test results of cross-equation restrictions reveal a 9.94% chance of a common unemployment coefficient for CMA countries.

Together, the results of the SUR and Gaussian Copula techniques provide mixed and inconclusive evidence to support the existence of a common PC among CMA member states. This study is the first of its kind in examining this phenomenon for currency board regimes like CMA, and one of the very few among emerging market economies.

The empirical properties of benchmark revisions to key US macroeconomic aggregates are examined. News versus noise impact of revisions is interpreted via the cointegration property of successive benchmark revisions. Cointegration breaks down in the last two years before a benchmark revision. Hence, we conclude that there is some information content in benchmark revisions. This last point is illustrated by reporting that inflation forecasts could be improved by the addition of a time series that reflects benchmark revisions to real GDP. Standard backward- and forward-looking Phillips curves are used to explore the statistical significance of benchmark revisions.

Should the central bank target asset price inflation? In their 1999 paper Bernanke and Gertler claimed that price stability and financial stability are “mutually consistent objectives” in a flexible inflation targeting regime which “dictates that central banks … should not respond to changes in asset prices.” This conclusion is straightforward within their framework in which asset price inflation shows up as a factor “augmenting” the IS curve. In this chapter, we pursue a different modeling strategy so that, in the end, asset price dynamics will be incorporated into the NK Phillips curve. We put ourselves, therefore, in the best position to obtain a significant stabilizing role for asset price targeting. It turns out, however, that inflation volatility is higher in the asset price targeting case. After all, therefore, targeting asset prices may not be a good idea.

One of the most significant changes in monetary economics at the beginning of the twenty-first century has been the virtual disappearance of what was once a dominant focus, the role of money in monetary policy, and parallelly, the disappearance of the liquidity preference-money supply (LM) curve. Economists used to consider monetary policy with the help of the LM curve as part of the analytical framework which captures the demand for money. However, the workhorse model of modern monetary theory and policy, the New Keynesian Dynamic Stochastic General Equilibrium (DSGE) framework, only comprises the dynamic investment-savings (IS) curve, the New Keynesian (NK) Phillips curve, and a monetary policy rule. The monetary policy rule is generally known as the Taylor rule. It relates the nominal interest rate to the output-gaps and inflation-gaps, but typically not to either the quantity or the growth rate of money. This change in the modern monetary model reflects how the central banks make monetary policy now. This study provides a detailed discussion on the role of money in monetary policy formulation in the context of the NK and the New Monetarist perspectives. The pros and cons of abandonment of money or the LM curve from monetary policy models have been discussed in detail.

Looks at the impact John Maynard Keynes and the movement (Keynesian) he started had on the theory and practice of economics in the 1930s and onwards. Identifies respective problems about capitalism and discusses them in depth. States that the monetary and fiscal policies recommended by Keynes have helped the West escape severe social consequences in the aftermath of the Great Depression. Goes on to show how economists after Keynes carried his work forward and upward in the 1940s and 1950s. Closes by stating there is a further, third revolution in economic thinking on the rise.

The purpose of this paper is to analyze empirically if financial crises have decreased potential output for a selected group of economies.

The authors estimate different country-specific stylized Phillips curves to verify if inflationary pressures were stronger on the recovery periods after financial crises, relative to the recovery periods after recessions.

The results, in general, do not show any clear empirical evidence that financial crises erode potential output. Moreover, there are no apparent differences in terms of the effects of financial crises over potential output between emerging and industrial economies.

This paper sheds light on the widely debated issue of whether financial crises constitute adverse supply shocks that lead to impairment in an economy’s productive potential. In interpreting the results, the authors must first recognize that all of them are based on the reduced-form relationships. Thus, they are about correlations and not necessarily about true structural relationships.

The study is very important for policy makers and specially Central Banks worldwide.

The loss of potential output is a very serious economic and social phenomenon. This paper sheds light on the debate if financial crisis lead to losses of potential output.

The paper is original in using more Phillips curves and because it studies also the behavior of emerging economies.

A standard model of equilibrium unemployment consists of static equations for real-wage ambitions (wage curve) and real-wage scope (price curve), which jointly determine the NAIRU. The heuristics of the model states that unless the rate of unemployment approaches the NAIRU from any given initial value, inflation will be increasing or decreasing over time. The paper aims to discuss these issues.

The authors formalize this influential heuristic argument with the aid of a dynamic model of the wage-price spiral where the static theory’s equations are re-interpreted as attractor relationships.

The authors show that NAIRU unemployment dynamics are sufficient but not necessary for inflation stabilization, and that the dynamic wage-price spiral model generally has a dynamically stable solution for any predetermined rate of unemployment. The authors also discuss a restricted version of the model that conforms to the accelerationist view that inflation increases/falls if unemployment is not at its “natural rate”.

To investigate the relevance of heuristical dynamics of influential macro models, explicit modelling of such dynamics is a necessary step.

An important argument against social orders that represent an attempt to target unemployment at relatively low levels, is refuted by the analysis.

A high degree of employment is a main premise for a social order with equal income distribution and a drive for productivity growth.

It is important that economics give a balanced view of the possibility of attaining inflation stability at low or moderate levels of unemployment. This offering is contributions to establish such a balance.