IDEAS home Printed from https://ideas.repec.org/p/ags/uerssr/277925.html
   My bibliography  Save this paper

Is the Phillips Curve Stable? A Time-Varying Parameter Approach

Author

Listed:
  • Conway, Roger K.
  • Gill, Gurmukh S.

Abstract

We derive two empirical Phillips curve models based on Robert Gordon's reduced form specification of conventional wage and price equations of a more complete structural model of the U.S. economy. One is a stochastic coefficients model and the other is a conventional fixed coefficients model. We used a stochastic coefficients empirical model to investigate the volatility of the Phillips curve relationship hypothesized by many economists during the 1970's. The visual evidence of the time-varying parameter plots suggests there has been variation in the shortrun Phillips curve. Comparative forecasting shows the stochastic coefficients model dominates the fixed coefficients model, further supporting the hypothesis of volatility.

Suggested Citation

  • Conway, Roger K. & Gill, Gurmukh S., 1987. "Is the Phillips Curve Stable? A Time-Varying Parameter Approach," Staff Reports 277925, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:277925
    DOI: 10.22004/ag.econ.277925
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/277925/files/ers-report-280.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.277925?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
    ---><---

    References listed on IDEAS

    as
    1. Blanchard, Olivier J, 1984. "The Lucas Critique and the Volcker Deflation," American Economic Review, American Economic Association, vol. 74(2), pages 211-215, May.
    2. Blinder, Alan S. & Newton, William J., 1981. "The 1971-1974 controls program and the price level : An econometric post-mortem," Journal of Monetary Economics, Elsevier, vol. 8(1), pages 1-23.
    3. Swamy, P. A. V. B. & Barth, J. R. & Tinsley, P. A., 1982. "The rational expectations approach to economic modelling," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 125-147, November.
    4. Blinder, Alan S. & Fischer, Stanley, 1981. "Inventories, rational expectations, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 277-304.
    5. Sargent, Thomas J, 1971. "A Note on the 'Accelerationist' Controversy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(3), pages 721-725, August.
    6. Swamy, P. A. V. B. & Tinsley, P. A., 1980. "Linear prediction and estimation methods for regression models with stationary stochastic coefficients," Journal of Econometrics, Elsevier, vol. 12(2), pages 103-142, February.
    7. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    8. George R. Moore & P. A. V. B. Swamy & Peter A. Tinsley, 1982. "An autopsy of a conventional macroeconomic relation: the case of money demand," Special Studies Papers 167, Board of Governors of the Federal Reserve System (U.S.).
    9. Arthur B. Kennickell & P. A. V. B. Swamy & Peter Von zur Muehlen, 1986. "Forecasting money demand with econometric models," Special Studies Papers 196, Board of Governors of the Federal Reserve System (U.S.).
    10. Lucas, Robert E, Jr, 1975. "An Equilibrium Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1113-1144, December.
    11. Havenner, A. & Swamy, P. A. V. B., 1981. "A random coefficient approach to seasonal adjustment of economic time series," Journal of Econometrics, Elsevier, vol. 15(2), pages 177-209, February.
    12. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    13. Jon Frye & Robert J. Gordon, 1980. "The Variance and Acceleration of Inflation in the 1970s: Alternative Explanatory Models and Methods," NBER Working Papers 0551, National Bureau of Economic Research, Inc.
    14. George L. Perry, 1983. "What Have We Learned about Disinflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 587-602.
    15. Santomero, Anthony M & Seater, John J, 1978. "The Inflation-Unemployment Trade-off: A Critique of the Literature," Journal of Economic Literature, American Economic Association, vol. 16(2), pages 499-544, June.
    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. Swamy, P.A.V.B. & Conway, Roger K. & LeBlanc, Michael, 1988. "The Stochastic Coefficients Approach to Econometric Modeling, Part III: Estimation, Stability Testing, and Prediction," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 41(1), pages 1-17.

    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. Arnade, Carlos & Shoemaker, Robbin, 1988. "Portraying Traders As Revenue Maximizers," Staff Reports 278144, United States Department of Agriculture, Economic Research Service.
    2. Conway, Roger K., 1985. "Examining Intertemporal Export Elasticities for Wheat, Corn, and Soybeans: A Stochastic Coefficients Approach," Technical Bulletins 157006, United States Department of Agriculture, Economic Research Service.
    3. Tucci, Marco P., 1995. "Time-varying parameters: a critical introduction," Structural Change and Economic Dynamics, Elsevier, vol. 6(2), pages 237-260, June.
    4. Conway, Roger & Hrubovcak, James & LeBlanc, Michael, 1985. "The Structure of Agricultural Investment: Comparing a Flexible Accelerator with Stochastic Coefficients," Technical Bulletins 157016, United States Department of Agriculture, Economic Research Service.
    5. Broadbent, Ben & Barro, Robert J., 1997. "Central bank preferences and macroeconomic equilibrium," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 17-43, June.
    6. John B. Taylor, 1983. "Rational Expectations Models in Macroeconomics," NBER Working Papers 1224, National Bureau of Economic Research, Inc.
    7. Christian Johnson & George G Kaufman, 2007. "Un banco, con cualquier otro nombre…," Boletín, CEMLA, vol. 0(4), pages 185-199, Octubre-d.
    8. J.P.G. Reijnders, 2007. "Impulse or propagation? How the tides turned in Business Cycle Theory," Working Papers 07-07, Utrecht School of Economics.
    9. Mulder, C.B., 1986. "Testing Korteweg's rational expectations model for a small open economy," Other publications TiSEM c52e6c80-834d-49c7-ae6a-b, Tilburg University, School of Economics and Management.
    10. Mankiw, N Gregory & Miron, Jeffrey A & Weil, David N, 1987. "The Adjustment of Expectations to a Change in Regime: A Study of the Founding of the Federal Reserve," American Economic Review, American Economic Association, vol. 77(3), pages 358-374, June.
    11. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
    12. 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.
    13. Karl Whelan, 2021. "Central banks and inflation: where do we stand and how did we get here?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 18(3), pages 310–330-3, December.
    14. Jeremy Rudd & Karl Whelan, 2007. "Modeling Inflation Dynamics: A Critical Review of Recent Research," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 155-170, February.
    15. Goutsmedt, Aurélien & Pinzón-Fuchs, Erich & Sergi, Francesco & Renault, Matthieu, 2019. "Reacting to the Lucas Critique: The Keynesians' Replies," OSF Preprints qxh46, Center for Open Science.
    16. Gempesaw, Conrado M., II & Tambe, A.M. & Nayga, Rodolfo M., Jr. & Toensmeyer, Ulrich C., 1988. "The Single Index Market Model In Agriculture," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 17(2), pages 1-9, October.
    17. Aurélien Goutsmedt & Goulven Rubin, 2018. "Robert J. Gordon and the introduction of the natural rate hypothesis in the Keynesian framework," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01821825, HAL.
    18. Chatterjee, Sidharta, 2014. "Equilibrium Models of Macroeconomic Science: What to Look For in (DSGE) Models?," MPRA Paper 53893, University Library of Munich, Germany.
    19. Arruda, Elano Ferreira & Ferreira, Roberto Tatiwa & Castelar, Ivan, 2011. "Modelos Lineares e Não Lineares da Curva de Phillips para Previsão da Taxa de Inflação no Brasil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 65(3), September.
    20. Frederic S. Mishkin, 1984. "The causes of inflation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-32.

    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:ags:uerssr:277925. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/ersgvus.html .

    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.