IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v174y2019icp149-152.html
   My bibliography  Save this article

Is the Phillips curve still alive? Evidence from the euro area

Author

Listed:
  • Hindrayanto, Irma
  • Samarina, Anna
  • Stanga, Irina M.

Abstract

We estimate the Phillips curve for the euro area and its five largest economies over 1985–2017 using an unobserved component model for inflation and unemployment. Inflation expectations are modeled as the trend component of annualized HICP inflation. We have three results. First, the relationship between unemployment and inflation is negative and significant in the euro area, Germany, France, and the Netherlands. Second, the Phillips curve slope is heterogeneous across countries. Third, the slope has not changed significantly since the Global Financial Crisis.

Suggested Citation

  • Hindrayanto, Irma & Samarina, Anna & Stanga, Irina M., 2019. "Is the Phillips curve still alive? Evidence from the euro area," Economics Letters, Elsevier, vol. 174(C), pages 149-152.
    • Handle: RePEc:eee:ecolet:v:174:y:2019:i:c:p:149-152
    DOI: 10.1016/j.econlet.2018.11.021
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176518304804
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2018.11.021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
    2. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 147-180.
    3. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    4. Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010. "Inflation-Gap Persistence in the US," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 43-69, January.
    5. Ciccarelli, Matteo & Osbat, Chiara, 2017. "Low inflation in the euro area: Causes and consequences," Occasional Paper Series 181, European Central Bank.
    6. Andrew Harvey, 2011. "Modelling the Phillips curve with unobserved components," Applied Financial Economics, Taylor & Francis Journals, vol. 21(1-2), pages 7-17.
    7. M. Deroose & A. Stevens, 2017. "Low inflation in the euro area : Causes and consequences," Economic Review, National Bank of Belgium, issue i, pages 111-125, June.
    8. Robert J. Gordon, 2013. "The Phillips Curve is Alive and Well: Inflation and the NAIRU During the Slow Recovery," NBER Working Papers 19390, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Petar Soric & Enric Monte & Salvador Torra & Oscar Claveria, 2022. "“Density forecasts of inflation using Gaussian process regression models”," AQR Working Papers 202207, University of Barcelona, Regional Quantitative Analysis Group, revised Jul 2022.
    2. Marente Vlekke & Martin Mellens, 2020. "An assessment of the Phillips curve over time: evidence for the United States and the euro area," CPB Discussion Paper 416.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. David Staines, 2023. "Stochastic Equilibrium the Lucas Critique and Keynesian Economics," Papers 2312.16214, arXiv.org, revised May 2024.
    4. Narayan, Seema & Cirikisuva, Salote & Naivutu, Revoni, 2023. "A hybrid NKPC inflation model for the small Island state of Fiji," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 873-886.
    5. Marente Vlekke & Martin Mellens & Siem Jan Koopmans, 2020. "An assessment of the Phillips curve over time: evidence for the United States and the euro area," CPB Discussion Paper 416, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Byrne, David & Zekaite, Zivile, 2020. "Non-linearity in the wage Phillips curve: Euro area analysis," Economics Letters, Elsevier, vol. 186(C).
    7. Bańbura, Marta & Bobeica, Elena, 2023. "Does the Phillips curve help to forecast euro area inflation?," International Journal of Forecasting, Elsevier, vol. 39(1), pages 364-390.
    8. Faryna, Oleksandr & Pham, Tho & Talavera, Oleksandr & Tsapin, Andriy, 2022. "Wage and unemployment: Evidence from online job vacancy data," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 52-70.
    9. Teresa Messner & Fabio Rumler, 2020. "Langfristige Determinanten der österreichischen Inflation – die Rolle des EU-Beitritts," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1-Q2/20, pages 169-179.
    10. Conti, Antonio M., 2021. "Resurrecting the Phillips Curve in Low-Inflation Times," Economic Modelling, Elsevier, vol. 96(C), pages 172-195.
    11. Dennis Bonam & Gabriele Galati & Irma Hindrayanto & Marco Hoeberichts & Anna Samarina & Irina Stanga, 2019. "Inflation in the euro area since the Global Financial Crisis," DNB Occasional Studies 1703, Netherlands Central Bank, Research Department.
    12. Koester, Gerrit & Lis, Eliza & Nickel, Christiane & Osbat, Chiara & Smets, Frank, 2021. "Understanding low inflation in the euro area from 2013 to 2019: cyclical and structural drivers," Occasional Paper Series 280, European Central Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mallick, Debdulal, 2019. "Policy regimes and the shape of the Phillips curve in Australia," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1077-1094.
    2. Frohm, Erik, 2020. "Price-setting and economic slack: Evidence from firm-level survey data," Journal of Macroeconomics, Elsevier, vol. 65(C).
    3. Fabian Eser & Peter Karadi & Philip R. Lane & Laura Moretti & Chiara Osbat, 2020. "The Phillips Curve at the ECB," Manchester School, University of Manchester, vol. 88(S1), pages 50-85, September.
    4. Michael McLeay & Silvana Tenreyro, 2020. "Optimal Inflation and the Identification of the Phillips Curve," NBER Macroeconomics Annual, University of Chicago Press, vol. 34(1), pages 199-255.
    5. Chiţu, Livia, 2016. "Reserve accumulation, inflation and moral hazard: Evidence from a natural experiment," Working Paper Series 1880, European Central Bank.
    6. Baxa Jaromír & Plašil Miroslav & Vašíček Bořek, 2017. "Inflation and the steeplechase between economic activity variables: evidence for G7 countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(1), pages 1-42, January.
    7. Pierpaolo Benigno & Gauti B. Eggertsson, 2023. "It’s Baaack: The Surge in Inflation in the 2020s and the Return of the Non-Linear Phillips Curve," NBER Working Papers 31197, National Bureau of Economic Research, Inc.
    8. Mallick, Debdulal, 2014. "A Spectral Representation of the Phillips Curve in Australia," MPRA Paper 59794, University Library of Munich, Germany.
    9. Orlov, D. & Postnikov, E., 2022. "Phillips curve: Inflation and NAIRU in the Russian regions," Journal of the New Economic Association, New Economic Association, vol. 55(3), pages 61-80.
    10. Fu, Bowen, 2020. "Is the slope of the Phillips curve time-varying? Evidence from unobserved components models," Economic Modelling, Elsevier, vol. 88(C), pages 320-340.
    11. Guido Ascari & Paolo Bonomolo & Qazi Haque, 2023. "The Long-Run Phillips Curve is ... a Curve," Working Papers 789, DNB.
    12. Dennis Bonam & Gabriele Galati & Irma Hindrayanto & Marco Hoeberichts & Anna Samarina & Irina Stanga, 2019. "Inflation in the euro area since the Global Financial Crisis," DNB Occasional Studies 1703, Netherlands Central Bank, Research Department.
    13. Aurélien Goutsmedt, 2021. "From the Stagflation to the Great Inflation: Explaining the US economy of the 1970s," Revue d'économie politique, Dalloz, vol. 131(3), pages 557-582.
    14. Camba-Mendez, Gonzalo & Rodriguez-Palenzuela, Diego, 2003. "Assessment criteria for output gap estimates," Economic Modelling, Elsevier, vol. 20(3), pages 529-562, May.
    15. Magnus Reif, 2020. "Macroeconomics, Nonlinearities, and the Business Cycle," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 87.
    16. Petr Polak & Filip Novotny, 2020. "Consumer and industrial prices in 2020 - the year of the coronavirus," Occasional Publications - Chapters in Edited Volumes, in: CNB Global Economic Outlook - December 2020, pages 12-18, Czech National Bank.
    17. Hideaki Aoyama & Corrado Di Guilmi & Yoshi Fujiwara & Hiroshi Yoshikawa, 2021. "Dual Labor Market and the "Phillips Curve Puzzle"," Papers 2103.06482, arXiv.org.
    18. Ascari, Guido & Castelnuovo, Efrem & Rossi, Lorenza, 2011. "Calvo vs. Rotemberg in a trend inflation world: An empirical investigation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(11), pages 1852-1867.
    19. Mohitosh Kejriwal & Xuewen Yu & Pierre Perron, 2020. "Bootstrap procedures for detecting multiple persistence shifts in heteroskedastic time series," Journal of Time Series Analysis, Wiley Blackwell, vol. 41(5), pages 676-690, September.
    20. Roger E.A. Farmer & Giovanni Nicolò, 2021. "Some International Evidence for Keynesian Economics Without the Phillips Curve," Manchester School, University of Manchester, vol. 89(S1), pages 1-22, September.

    More about this item

    Keywords

    Phillips curve; Unobserved components model; Euro area;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:174:y:2019:i:c:p:149-152. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.