{"title":"The intermittent Phillips curve: Finding a stable (but persistence-dependent) Phillips curve model specification","authors":"Richard Ashley, Randal Verbrugge","doi":"10.1111/ecin.13281","DOIUrl":null,"url":null,"abstract":"<p>We make substantial progress on understanding the Phillips curve, yielding important monetary policy implications. Inflation responds differently to persistent versus moderately persistent (or transient) fluctuations in the unemployment gap. This persistence-dependent relationship aligns with business-cycle stages, and is consistent with existing theory. Previous work fails to model this dependence, thereby finding the numerous “inflation puzzles”—for example, missing inflation/disinflation—noted in the literature. Our specification eliminates these puzzles; for example, the Phillips curve has not weakened; inflation's post-2012 slow upward trudge was predictable. The model's coefficients are stable, and it provides accurate out-of-sample conditional recursive forecasts through the Great Recession and recovery.</p>","PeriodicalId":51380,"journal":{"name":"Economic Inquiry","volume":"63 3","pages":"926-944"},"PeriodicalIF":1.3000,"publicationDate":"2025-02-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economic Inquiry","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/ecin.13281","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
We make substantial progress on understanding the Phillips curve, yielding important monetary policy implications. Inflation responds differently to persistent versus moderately persistent (or transient) fluctuations in the unemployment gap. This persistence-dependent relationship aligns with business-cycle stages, and is consistent with existing theory. Previous work fails to model this dependence, thereby finding the numerous “inflation puzzles”—for example, missing inflation/disinflation—noted in the literature. Our specification eliminates these puzzles; for example, the Phillips curve has not weakened; inflation's post-2012 slow upward trudge was predictable. The model's coefficients are stable, and it provides accurate out-of-sample conditional recursive forecasts through the Great Recession and recovery.
期刊介绍：
Published since 1962, (formerly Western Economic Journal), EI is widely regarded as one of the top scholarly journals in its field. Besides containing research on all economics topic areas, a principal objective is to make each article understandable to economists who are not necessarily specialists in the article topic area. Nine Nobel laureates are among EI long list of prestigious authors.
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