scholarly journals Will the (German) NAIRU Please Stand Up?

2005 ◽  
Vol 6 (2) ◽  
pp. 131-153 ◽  
Author(s):  
Wolfgang Franz
Keyword(s):  
Inflation Rate ◽  
Phillips Curve ◽  
Critical Assessment ◽  
Time Variability ◽  
Analytical Instrument ◽  
Direct Measures

Abstract This paper deals with a critical assessment of the ‘non-accelerating inflation rate of unemployment’ (NAIRU) for Germany. There are quite a few obstacles to perceiving the NAIRU as an easy-to-use analytical instrument: the possibility of a non-vertical Phillips curve, the occurrence of shocks and hysteresis effects, and the (mis-)measurement of important variables, cointegration issues and a time variability of the NAIRU. A new attempt is made to estimate a NAIRU for Germany using direct measures of inflationary expectations. However, by any method, the NAIRU is very hard to determine and subject to considerable arbitrariness.

scholarly journals Movement of Inflation and New Keynesian Phillips Curve in ASEAN

Economies ◽  
2021 ◽  
Vol 9 (1) ◽  
pp. 34
Author(s):  
Adhitya Wardhono ◽  
M. Abd. Nasir ◽  
Ciplis Gema Qori’ah ◽  
Yulia Indrawati
Keyword(s):  
Inflation Rate ◽  
Phillips Curve ◽  
New Keynesian ◽  
Inflation Expectations ◽  
New Keynesian Phillips Curve ◽  
Method Of Moment ◽  
Inflation Model ◽  
Wage Inflation ◽  
Generalized Method Of Moment ◽  
Forward Looking

The development of the theory of dynamic inflation begins by linking wage inflation and unemployment. In further developments, factor of expectation is classified into inflation model. The study used inflation data is important for ASEAN, because ASEAN is one of the strengths of the international economy. This study analyzes the dynamics of inflation in the ASEAN using framework the New-Keynesian Phillips Curve (NKPC) model. The data used is the quarterly panel data from 5 ASEAN members in the period 2005.QI–2018.QIV. The study of this dynamic inflation applies quarter to quarter inflation data, meaning that the inflation rate is the percentage change in the general price of the current quarter compared to last quarter general price divided by the last quarter. The empirical results are estimated by using the Generalized Method of Moment (GMM), both of the system and first different indicates that the pattern formation of inflation expectations are backward-looking and forward-looking. In addition, the estimated NKPC models show the backward-looking behavior is more dominant than the forward looking. Changes in inflation are not entirely influenced by expectations of inflation in each country. Changes in inflation are also influenced by the output gap, changes in money supply, and exchange rate. Based on the findings of this study, it can be concluded that the NKPC models can explain the dynamics of inflation in each country in the ASEAN region.

An Agent-Based Model to Forecast the Inflation Rate in the Eurozone

2017 ◽  
pp. 72-92
Author(s):  
Juan Luis Santos ◽  
Jagoda Anna Kaszowska ◽  
Tomás Mancha Navarro
Keyword(s):  
Financial Institutions ◽  
Inflation Rate ◽  
Phillips Curve ◽  
Supply And Demand ◽  
Single Agent ◽  
Market Equilibrium ◽  
Agent Based Model ◽  
Agent Based ◽  
Long Run ◽  
Inflation Rates

The aim of the agent-based model presented in this chapter is to explain the determinants of inflation and to forecast the inflation rate in the Eurozone for the next five years. The behaviors of agents and their expectations are interrelated and explained by macroeconomic models applied to heterogeneous agents of three classes: individuals, companies and financial institutions. In addition, the behavior of public sector and central bank is also modeled with a single agent of each kind. Once the quantitative easing policy is implemented, the quantitative theory of money expects higher inflation rates in the long run. Inflation should remain low taking into account the Phillips-Curve. Last, according to the Aggregated Supply and Demand as well as to the Money Market equilibrium, the behaviors modeled allow forecasting low inflation. However, an external shock, as it would be an increase in the price of important commodities, can alter the inflation rate to a great extent.

MODELING THE PHILLIPS CURVE IN CHINA: A NONLINEAR PERSPECTIVE

2016 ◽  
Vol 21 (2) ◽  
pp. 439-461 ◽  
Author(s):  
Lingxiang Zhang
Keyword(s):  
Regression Model ◽  
Inflation Rate ◽  
Phillips Curve ◽  
Smooth Transition ◽  
Short Term ◽  
Smooth Transition Regression ◽  
Using Data ◽  
Smooth Transition Regression Model ◽  
Economic Growth Rates ◽  
The Relationship

This paper investigates the nonlinear dynamics of the inflation–output type of Phillips curve based on a multiple-regime smooth transition regression model using data from China. The empirical results indicate significant nonlinearities in China's Phillips curve. The relationship between inflation and output can be modeled by a four-regime smooth transition regression model in which the responses of inflation to output depend on both inflation and economic growth rates. The inflation–output type Phillips curve may be positively sloped, negatively sloped, or even vertical in the short term, depending on different business cycles. Furthermore, we analyze business cycle fluctuations based on the nonlinear Phillips curve, indicating a coexisting zone of stable inflation rate and rapid growth rate.

Phillips curve and long-run inflation under commitment

2020 ◽  
Vol 47 (1) ◽  
pp. 21-35
Author(s):  
Dario Pontiggia
Keyword(s):  
Steady State ◽  
Design Methodology ◽  
Inflation Rate ◽  
Phillips Curve ◽  
Monetary Authority ◽  
New Keynesian ◽  
Content Type ◽  
Rule Of Thumb ◽  
Long Run ◽  
Forward Looking

PurposeThe purpose of this paper is to study the optimal long-run rate of inflation in the presence of a hybrid Phillips curve, which nests a purely backward-looking Phillips curve and the purely forward-looking New Keynesian Phillips curve (NKPC) as special limiting cases.Design/methodology/approachThis paper derives the long-run rate of inflation in a basic New Keynesian (NK) model, characterized by sticky prices and rule-of-thumb behavior by price setters. The monetary authority possesses commitment and its objective function stems from an approximation to the utility of the representative household.FindingsCommitment solution for the monetary authority leads to steady-state outcomes in which inflation, albeit small, is positive. Rising from zero under the purely forward-looking NKPC, the optimal long-run rate of inflation reaches its maximum under the purely backward-looking Phillips curve. In this case, inflation bias arises, while, under the hybrid Phillips curve, positive long-run inflation is associated with an output gain.Research limitations/implicationsThis paper serves as a clarification against the misperception that log-linearized models take as given the steady-state inflation rate rather than being capable of determining it. Analysis is sensitive to the basic NK setting, with the assumed rule-of-thumb behavior by price setters and price staggering.Originality/valueThe results are the first to quantify the optimal long-run rate of inflation in a fully microfounded model that nests different Phillips curves.

scholarly journals THE PHILLIPS CURVE IN PORTUGAL

2013 ◽  
Vol 31 (60) ◽  
Author(s):  
Agostinho Silvestre Rosa
Keyword(s):  
Unemployment Rate ◽  
Productivity Growth ◽  
Inflation Rate ◽  
Phillips Curve ◽  
Labour Productivity ◽  
Annual Data ◽  
Short Term ◽  
Labour Productivity Growth ◽  
Average Labour Productivity ◽  
Wage Inflation

This paper estimates the Phillips curve in Portugal using the Johansen Method, with the wage inflation rate as a dependent variable, based on annual data from the period 1954-1995. The main conclusions are as follows. Firstly, in the long term, the wage inflation rate relates positively to the inflation rate and negatively to the unemployment rate, as expected. There is also a positive relationship between the wage inflation rate and the average labour productivity growth index. Secondly, in the short term, the variation of the wage inflation rate relates negatively and significantly to the error correction mechanism with a negative unitary coefficient; therefore, there is a quick and significant response to the equilibrium error between the wage inflation rate and its determinants. Besides this adjustment, the wage inflation rate responds positively to a lagged wage inflation rate. The variation in the unemployment rate and the average labour productivity growth present the expected signal, negative and positive respectively, but without significance in the short term. The dummy that refers to the April 1974 revolution is significant.

JOB TURNOVER, TREND GROWTH, AND THE LONG-RUN PHILLIPS CURVE

2016 ◽  
Vol 21 (4) ◽  
pp. 835-861 ◽  
Author(s):  
Dennis J. Snower ◽  
Mewael F. Tesfaselassie
Keyword(s):  
Inflation Rate ◽  
Phillips Curve ◽  
New Keynesian ◽  
Job Turnover ◽  
Turnover Rates ◽  
Positive Effects ◽  
Keynesian Model ◽  
Long Run ◽  
Productive Growth ◽  
Trend Growth

The paper reexamines the long-run Phillips curve in a New Keynesian model with job turnover and trend productivity growth. We show that an increase in money growth has substantial positive effects on steady state output, consumption, and employment in the presence of (i) observed job turnover rates and, if consumption smoothing is sufficiently strong, (ii) observed productive growth rates. Furthermore, we show that the optimal inflation rate is slightly under 2% for reasonable calibrations of job turnover and trend growth.

Is there a Core of Macroeconomics that Euro Area Forecasters Believe In?

2012 ◽  
Vol 13 (1) ◽  
pp. 103-115 ◽  
Author(s):  
Christian Pierdzioch ◽  
Georg Stadtmann ◽  
Jan-Christoph Rülke
Keyword(s):  
Growth Rate ◽  
Unemployment Rate ◽  
Euro Area ◽  
Inflation Rate ◽  
Phillips Curve ◽  
Practical Relevance ◽  
Okun’S Law ◽  
Macroeconomic Theory ◽  
Quantity Theory ◽  
Okun's Law

Abstract The quantity theory of money, Okun’s law, and the Phillips curve are cornerstones of macroeconomic theory. But are they also of practical relevance? Using survey data for the euro area, we found that professional economists’ forecasts are consistent with a version of the quantity theory in which forecasts of the growth rate of money supply correlate in a proportional way with forecasts of the inflation rate. We also found that forecasts of changes in the unemployment rate and forecasts of the growth rate of real output are consistent with Okun’s law. Evidence of a systematic link between forecasts of the inflation rate and forecasts of the unemployment rate, however, is not strong.

scholarly journals Phillips curve in Brazil: an unobserved components approach

2014 ◽  
Vol 44 (4) ◽  
pp. 787-814 ◽  
Author(s):  
Vicente da Gama Machado ◽  
Marcelo Savino Portugal
Keyword(s):  
Economic Activity ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Phillips Curve ◽  
Capacity Utilization ◽  
Reduced Form ◽  
Utilization Rate ◽  
Subprime Crisis ◽  
Unobserved Components ◽  
Using Data

This paper estimates reduced-form Phillips curves for Brazil with a framework of time series with unobserved components, in the spirit of Harvey (2011). However, we allow for expectations to play a key role using data from the Central Bank of Brazil's Focus survey. Besides GDP, we also use industrial capacity utilization rate and IBC-Br index, as measures of economic activity. Our findings support the view that Brazilian inflation targeting has been successful in reducing the variance of both the seasonality and level of the inflation rate, at least until the beginning of the subprime crisis. Furthermore, inflation in Brazil seems to have responded gradually less to measures of economic activity in recent years. This provides some evidence of a flattening of the Phillips curve in Brazil, a trend previously shown by recent studies for other countries.

scholarly journals The Phillips Curve and NAIRU Revisited: New Estimates for Germany

2008 ◽  
Vol 228 (5-6) ◽  
Author(s):  
Bernd Fitzenberger ◽  
Wolfgang Franz ◽  
Oliver Bode
Keyword(s):  
Inflation Rate ◽  
Phillips Curve ◽  
Structural Break ◽  
Partially Linear Model ◽  
Time Varying ◽  
German Unification ◽  
Partially Linear ◽  
Expected Inflation ◽  
Inflation Rates ◽  
Definition Of

SummaryThis paper provides new estimates of a time-varying NAIRU for Germany taking account of the structural break caused by German unification using two alternative estimators, the Kalman- Filter and the partially linear model. Estimating a standard Phillips curve, the sum of coefficients associated with expected inflation is far below unity, whatever measure of expected inflation rates is employed. Therefore, either the NAIRU concept is not applicable to Germany or, as it is our suggestion, one estimates the unemployment rate that is compatible with a tolerable inflation rate of say 2 percent following roughly the inflation target put forward by the European Central Bank. The estimates presented in this paper suggest that the NAIRU compatible with 2 percent inflation in Germany is currently around 7 percent if the definition of unemployment follows the concept of the ILO. In contrast to the consensus in the literature, our estimates suggest furthermore that the NAIRU in Germany has not increased since the early 1990's.

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