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A time-varying volatility approach to modeling the phillips curve: A cross-country analysis

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  • William Seyfried
  • Bradley Ewing

Abstract

This research examines the Phillips curve price adjustment mechanism allowing for the conditional variance of inflation to be time varying. Specifically, we estimate ARCH and GARCH models of inflation for Canada, Japan, and the U.K. The results suggest that an increase in the conditional variability of inflation leads to higher levels of inflation. In addition, inclusion of inflation variability in the Phillips curve model results in a higher weight being attributed to the output gap than in traditional models. (JEF E24) Copyright Springer 2004

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  • William Seyfried & Bradley Ewing, 2004. "A time-varying volatility approach to modeling the phillips curve: A cross-country analysis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(2), pages 186-197, June.
    • Handle: RePEc:spr:jecfin:v:28:y:2004:i:2:p:186-197
    DOI: 10.1007/BF02761610
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