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The Time‐Varying Phillips Correlation

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  • LUCA BENATI

Abstract

We use complex demodulation techniques to investigate changes in the correlation between real activity and inflation at the business‐cycle frequencies in the United States, the United Kingdom, the Eurozone, and 10 other Organization for Economic Cooperation and Development (OECD) countries over the post‐WWII era. Consistent with the analysis of Ball, Mankiw, and Romer (1988) we document a positive correlation between the time‐varying average gain of real activity onto inflation at the business‐cycle frequencies and inflation's Hodrick‐Prescott trend, which is compatible with New Keynesian theories emphasizing the link between trend inflation, the frequency of price adjustments, and the slope of the Phillips trade‐off.

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  • Luca Benati, 2007. "The Time‐Varying Phillips Correlation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1275-1283, August.
    • Handle: RePEc:wly:jmoncb:v:39:y:2007:i:5:p:1275-1283
    DOI: 10.1111/j.1538-4616.2007.00066.x
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    1. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. [経済]時変的なフィリップスの相関
      by himaginary in himaginaryの日記 on 2018-04-20 00:00:00
    2. Phillips Curve bashing and immaculate inflation
      by Tony Yates in longandvariable on 2018-04-09 12:34:56

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    1. repec:zbw:bofrdp:2019_012 is not listed on IDEAS
    2. Gbaguidi DAVID, 2011. "Expectations Impact On The Effectiveness Of The Inflation-Real Activity Trade-Off," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 2(2), pages 141-181.
    3. Luís Aguiar-Conraria & Manuel M. F. Martins & Maria Joana Soares, 2019. "The Phillips Curve at 60: time for time and frequency," NIPE Working Papers 04/2019, NIPE - Universidade do Minho.
    4. Gabriel, Ricardo Duque, 2023. "Monetary policy and the wage inflation-unemployment tradeoff," European Economic Review, Elsevier, vol. 159(C).
    5. Yasufumi Gemma & Takushi Kurozumi & Mototsugu Shintani, 2023. "Trend Inflation and Evolving Inflation Dynamics:A Bayesian GMM Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 506-520, December.
    6. McAdam, Peter & Willman, Alpo, 2007. "State-dependency and firm-level optimization: a contribution to Calvo price staggering," Working Paper Series 806, European Central Bank.
    7. Kristen Tauber & Willem Van Zandweghe, 2020. "A Growth-Augmented Phillips Curve," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2020(16), pages 1-6, July.
    8. Benjamin Wong, 2013. "The Evolution of the U.S. Output-Inflation Tradeoff," CAMA Working Papers 2013-70, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Shirota, Toyoichiro, 2015. "Flattening of the Phillips curve under low trend inflation," Economics Letters, Elsevier, vol. 132(C), pages 87-90.
    10. Benati, Luca, 2009. "Long run evidence on money growth and inflation," Working Paper Series 1027, European Central Bank.
    11. Adama Zerbo, 2018. "Essai d'une nouvelle représentation macroéconomique du marché du travail," Documents de travail 178, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
    12. Gertler, Pavel & Hofmann, Boris, 2018. "Monetary facts revisited," Journal of International Money and Finance, Elsevier, vol. 86(C), pages 154-170.
    13. P. Ormerod & B. Rosewell & P. Phelps, 2013. "Inflation/unemployment regimes and the instability of the Phillips curve," Applied Economics, Taylor & Francis Journals, vol. 45(12), pages 1519-1531, April.
    14. Peter Mcadam & Alpo Willman, 2010. "Arrow–Calvo Price Staggering," Manchester School, University of Manchester, vol. 78(6), pages 556-581, December.
    15. Aguiar-Conraria, Luís & Martins, Manuel M.F. & Soares, Maria Joana, 2023. "The Phillips curve at 65: Time for time and frequency," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    16. Heinrichs, Katrin & Wagner, Helmut, 2019. "Positive trend inflation and the Phillips curve – A tale of two slopes and various impulse responses," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 283-307.
    17. Luís Aguiar-Conraria & Manuel M. F. Martins & Maria Joana Soares, 2019. "The Phillips Curve at 60: time for time and frequency," CEF.UP Working Papers 1902, Universidade do Porto, Faculdade de Economia do Porto.
    18. Benati, Luca, 2010. "Evolving Phillips trade-off," Working Paper Series 1176, European Central Bank.
    19. Gbaguidi, David Sedo, 2011. "Regime Switching in a New Keynesian Phillips Curve with Non-zero Steady-state Inflation Rate," MPRA Paper 35481, University Library of Munich, Germany.
    20. Castillo, Paul & Montoya, Jimena & Quineche, Ricardo, 2016. "From the “Great Inflation” to the “Great Moderation” in Peru: A Time Varying Structural Vector Autoregressions Analysis," Working Papers 2016-003, Banco Central de Reserva del Perú.
    21. Gbaguidi, David, 2012. "La courbe de Phillips : temps d’arbitrage et/ou arbitrage de temps," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(1), pages 87-119, mars.
    22. Kristian Jönsson, 2010. "Trend extraction with a judgement-augmented hodrick–prescott filter," Empirical Economics, Springer, vol. 39(3), pages 703-711, December.
    23. Andrea Vaona, 2008. "Inflation persistence, structural breaks and omitted variables: a critical view," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 0802, USI Università della Svizzera italiana.

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