The Phillips Curve in the United States and Canada: A GARCHDCC Analysis
DOI:
https://doi.org/10.6000/1929-7092.2014.03.01Keywords:
GARCH-DCC model, Phillips curve, financial crisisAbstract
By applying the GARCH-DCC model, we reexamine the Phillips curve based on a time-varying correlation analysis for Canada and the United States from January 1985 to December 2012. The empirical results show that the sign of the correlation between the inflation rate and the unemployment rate is negative during recession periods but positive during boom periods.References
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Rubio, O.B., Roldán, C.D., Esteve, V. (2007) Change of regime and Phillips curve stability: the case of Spain, 1964-2002. Journal of Policy Modeling, 29, 453-462.
http://dx.doi.org/10.1016/j.jpolmod.2006.06.017
Russell, E., Chowdhury, R.A. (2013) Estimating Unites States Phillips curves with expectation consistent with the statistical process of inflation. Journal of Macroeconomics, 35, 24-38.
http://dx.doi.org/10.1016/j.jmacro.2012.11.004
Sachsida, A., Divino, J.A., Cajueiro, D.O. (2011) Inflation, unemployment, and the time consistency of the US monetary policy. Structural Change and Economic Dynamics, 22, 173-179.
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Zivot, E., Andrews, D.W.K. (1992) Further evidence on the great crash, the oil-price shock and the unit root hypothesis. Journal of Business & Economic Statistics, 10, 251-270
http://dx.doi.org/10.1016/j.ecosys.2012.06.002
Engle, R. (2002) Dynamic conditional correlation: a simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics, 20, 339-350.
http://dx.doi.org/10.1198/073500102288618487
Friedman, M. (1968) The role of monetary policy. American Economic Review, 58, 1-17.
Hamilton, J. (2008) Macroeconomics and ARCH. Mimeo, University of California, San Diego.
http://dx.doi.org/10.3386/w14151
Jones, P.M., Olson, E. (2013) The time-varying correlation between uncertainty, output, and inflation: Evidence from a DCC-GARCH model. Economics Letters, 118, 33-37.
http://dx.doi.org/10.1016/j.econlet.2012.09.012
Karanassou, M., Sala, H. (2010) The US inflation-unemployment trade-off revisited: New evidence for policy-making. Journal of Policy Modeling, 32, 758-777.
http://dx.doi.org/10.1016/j.jpolmod.2010.08.004
Lipsey, R.G. (1960) The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1862-1957: A further analysis, Economica, 27, 1-31.
http://dx.doi.org/10.2307/2551424
Mankiw, N.G. (2000) The inexorable and mysterious tradeoff between inflation and unemployment. Economic Journal, 111, 45-61.
http://dx.doi.org/10.1111/1468-0297.00619
Phillips, A.W. (1958) The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1862-1957. Economica, 25, 283-299.
Perron, P. (1989) The great crash, the oil price shock, and the unit root hypothesis. Econometrica, 57, 1361-1401.
http://dx.doi.org/10.2307/1913712
Rahman, S., Serletis, A. (2012) Oil price uncertainty and the Canadian economy: Evidence from a VARMA, GARCH-in-Mean, asymmetric BEKK model. Energy Economics, 34, 603-610.
http://dx.doi.org/10.1016/j.eneco.2011.08.014
Rubio, O.B., Roldán, C.D., Esteve, V. (2007) Change of regime and Phillips curve stability: the case of Spain, 1964-2002. Journal of Policy Modeling, 29, 453-462.
http://dx.doi.org/10.1016/j.jpolmod.2006.06.017
Russell, E., Chowdhury, R.A. (2013) Estimating Unites States Phillips curves with expectation consistent with the statistical process of inflation. Journal of Macroeconomics, 35, 24-38.
http://dx.doi.org/10.1016/j.jmacro.2012.11.004
Sachsida, A., Divino, J.A., Cajueiro, D.O. (2011) Inflation, unemployment, and the time consistency of the US monetary policy. Structural Change and Economic Dynamics, 22, 173-179.
http://dx.doi.org/10.1016/j.strueco.2010.12.002
Zivot, E., Andrews, D.W.K. (1992) Further evidence on the great crash, the oil-price shock and the unit root hypothesis. Journal of Business & Economic Statistics, 10, 251-270
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Published
2014-02-04
How to Cite
Yang, L., & Hamori, S. (2014). The Phillips Curve in the United States and Canada: A GARCHDCC Analysis. Journal of Reviews on Global Economics, 3, 1–6. https://doi.org/10.6000/1929-7092.2014.03.01
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