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Is the slope of the Phillips curve time-varying? Evidence from unobserved components models

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  • Fu, Bowen

Abstract

This paper formally tests for time variation in the slope of the Phillips curve using a variety of measures of inflation expectations and real economic slack. We find that time variation in the slope of the Phillips curve depends on the measure of inflation expectations rather than the measure of real economic slack. We find strong evidence in support of the time-varying slopes of the Phillips curve with different measures of inflation expectations. Thus, we conclude that the slope of the Phillips curve is time-varying.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:ecmode:v:88:y:2020:i:c:p:320-340
    DOI: 10.1016/j.econmod.2019.09.045
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    References listed on IDEAS

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    4. Chan, Joshua C.C. & Poon, Aubrey & Zhu, Dan, 2023. "High-dimensional conditionally Gaussian state space models with missing data," Journal of Econometrics, Elsevier, vol. 236(1).
    5. Bonam, Dennis & de Haan, Jakob & van Limbergen, Duncan, 2021. "Time-varying wage Phillips curves in the euro area with a new measure for labor market slack," Economic Modelling, Elsevier, vol. 96(C), pages 157-171.

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    More about this item

    Keywords

    Bayesian estimation; The slope of the Phillips curve; Unobserved components model;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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

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