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The Slope of the Euro Area Phillips Curve: Always and Everywhere the Same?

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  • Johanna Amberger
  • Ralf Fendel

Abstract

To determine whether the sensitivity of inflation to changes in the business cycle varies over time, hybrid new Keynesian Phillips curves are formulated in state space form and estimated via the Kalman filter. Analyses cover the Euro Area aggregate and eleven Euro Area countries. Results confirm the increasingly important role of inflation expectations. While the Phillips curve flattens until 2007, slope coefficients increase considerably with the financial crisis in 2007/08 on the basis of output gaps. Nonetheless, stable or decreasing slope coefficients are observed on the basis of unemployment gaps, indicating strong dependence on the driving variable used in estimations. Overall, differences in cross-country Phillips curve parameters are decreasing, indicating a convergence of Euro Area countries' inflation dynamics since 1990.

Suggested Citation

  • Johanna Amberger & Ralf Fendel, 2017. "The Slope of the Euro Area Phillips Curve: Always and Everywhere the Same?," Applied Economics and Finance, Redfame publishing, vol. 4(3), pages 77-88, May.
    • Handle: RePEc:rfa:aefjnl:v:4:y:2017:i:3:p:77-88
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    References listed on IDEAS

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    Cited by:

    1. Hsien-Ming Chou & Tsai-Lun Cho, 2020. "Effects of Slope Coefficients and Bollinger Bands on Short-term Investment," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(2), pages 1-7.
    2. Schuffels, Johannes & Kool, Clemens & Lieb, Lenard & van Veen, Tom, 2024. "Is the slope of the euro area Phillips curve steeper than it seems? Heterogeneity and identification," Journal of International Money and Finance, Elsevier, vol. 148(C).
    3. Fabio Busetti & Michele Caivano & Davide Delle Monache, 2021. "Domestic and Global Determinants of Inflation: Evidence from Expectile Regression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(4), pages 982-1001, August.
    4. Johannes Schuffels & Clemens Kool & Lenard Lieb & Tom van Veen, 2022. "Is the Slope of the Euro Area Phillips Curve Steeper than It Seems? Heterogeneity and Identification," CESifo Working Paper Series 10103, CESifo.

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    More about this item

    Keywords

    time-varying Phillips curve; inflation dynamics; output gap; unemployment gap;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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