scholarly journals Certainty Equivalence and the Non-Vertical Long Run Phillips-Curve

1998 ◽  
Author(s):  
Yvan Lengwiler
Keyword(s):  
Phillips Curve ◽  
Certainty Equivalence ◽  
Long Run

scholarly journals Inflation and Unemployment Trade-off: Is Phillips Curve True for African Developing Countries? Evidence from Sudan

2021 ◽  
Vol 4 (3) ◽  
Author(s):  
Omer Allagabo Omer Mustafa
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Phillips Curve ◽  
Economic Thought ◽  
Trade Off ◽  
Long Run ◽  
Short Run ◽  
Wage Inflation ◽  
The Relationship

The relationship between wage inflation and unemployment (Phillips Curve) is controversial in economic thought, and the controversy is centered around whether there is always a trade-off or not. If this relationship is negative it is called The short-run Fillips Curve. However, in the long run, this relationship may probable not exist. The matter of how inflation and unemployment influence economic growth, is debatably among macroeconomic policymakers. This study examines the behavior of the Phillips Curve in Sudan and its effect on economic growth.

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.

scholarly journals Can Agents with Causal Misperceptions be Systematically Fooled?

2019 ◽  
Vol 18 (2) ◽  
pp. 583-617 ◽  
Author(s):  
Ran Spiegler
Keyword(s):  
Monetary Policy ◽  
Bayesian Networks ◽  
Directed Acyclic Graph ◽  
Phillips Curve ◽  
Causal Model ◽  
Expected Value ◽  
Prediction Errors ◽  
Acyclic Graph ◽  
Long Run ◽  
Individual Variables

Abstract An agent forms estimates (or forecasts) of individual variables conditional on some observed signal. His estimates are based on fitting a subjective causal model—formalized as a directed acyclic graph, following the “Bayesian networks” literature—to objective long-run data. I show that the agent’s average estimates coincide with the variables’ true expected value (for any underlying objective distribution) if and only if the agent’s graph is perfect—that is, it directly links every pair of variables that it perceives as causes of some third variable. This result identifies neglect of direct correlation between perceived causes as the kind of causal misperception that can generate systematic prediction errors. I demonstrate the relevance of this result for economic applications: speculative trade, manipulation of a firm’s reputation, and a stylized “monetary policy” example in which the inflation-output relation obeys an expectational Phillips Curve.

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 IS BUSINESS CYCLE ASYMMETRY INTRINSIC IN INDUSTRIALIZED ECONOMIES?

2019 ◽  
Vol 24 (6) ◽  
pp. 1403-1436 ◽  
Author(s):  
James Morley ◽  
Irina B. Panovska
Keyword(s):  
Business Cycle ◽  
Model Uncertainty ◽  
Phillips Curve ◽  
Capacity Utilization ◽  
Output Growth ◽  
Underlying Structure ◽  
Output Gap ◽  
Cycle Asymmetry ◽  
Long Run ◽  
Intrinsic Characteristic

We consider a model-averaged forecast-based estimate of the output gap to measure economic slack in 10 industrialized economies. Our measure takes changes in the long-run growth rate into account and, by addressing model uncertainty using equal weights on different forecast-based estimates, is robust to different assumptions about the underlying structure of the economy. For all 10 countries in the sample, we find that the estimated output gap has much larger negative movements during recessions than positive movements in expansions, suggesting business cycle asymmetry is an intrinsic characteristic of industrialized economies. Furthermore, the estimated output gap is always strongly negatively correlated with future output growth and unemployment and positively correlated with capacity utilization. It also implies a convex Phillips Curve in many cases. The model-averaged output gap is reliable in real time in the sense of being subject to relatively small revisions.

scholarly journals The wrong track also leads someplace: Milton Friedman's presidential address at 50

2018 ◽  
Vol 6 (4) ◽  
pp. 517-532 ◽  
Author(s):  
Servaas Storm
Keyword(s):  
Phillips Curve ◽  
Presidential Address ◽  
Aggregate Demand ◽  
Financial Fragility ◽  
American Economic Association ◽  
Structural Forces ◽  
Long Run ◽  
Economic Association ◽  
The Right ◽  
Do So

Milton Friedman's presidential address to the American Economic Association holds a mythical status as the harbinger of the supply-side counter-revolution in macroeconomics – centred on the rejection of the long-run Phillips-curve inflation–unemployment trade-off. Friedman (seconded by Edmund Phelps) argued that the long run is determined by ‘structural’ forces, not demand, and his view swept the profession and dominated academic economics and macro policymaking for four decades. Friedman, tragically, put macroeconomics on the wrong track which led to disaster: secular stagnation, rising inequality, mounting indebtedness, financial fragility, a banking catastrophe and recession – and no free lunches. This is Friedman's legacy. We have to unlearn the wrong lessons and return macroeconomics to the right track. To do so, this paper shows that Friedman's (and Phelps's) conclusions break down in a general model of the long run in which productivity growth is endogenous – aggregate demand is driving everything again, short and long.

Providing an Empirical Insight into Nigeria’s Non-acceleration Rate of Unemployment

2018 ◽  
Vol 3 (2) ◽  
pp. 179-190
Author(s):  
Richardson Kojo Edeme
Keyword(s):  
Phillips Curve ◽  
Least Squares Method ◽  
Full Employment ◽  
Negative Relationship ◽  
Policy Decision ◽  
Ordinary Least Squares ◽  
Acceleration Rate ◽  
Long Run ◽  
Short Run ◽  
Relationship Of

This study was necessary since inflation and unemployment are twin macroeconomic variables that exert influence on the policy decision of any economy. Using time series from 1972 to 2015, the ordinary least-squares method was employed to determine both the short-run and long-run Phillips curve to ascertain if it is evident in Nigeria. The non-accelerating inflation rate of unemployment (NAIRU) was also estimated. The results establish the presence of a negative relationship of both inflation and unemployment in the short-run and long-run unemployment, though not significant. Since NAIRU is 11.63, the policy implication is that if the economy was to achieve full employment, an unemployment rate of 11.63 per cent is inevitable.

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