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TitleThe Phillips Curve at 60: time for time and frequency
Author(s)Aguiar-Conraria, Luís
Martins,Manuel M. F.
Soares, M. J.
KeywordsPhillips Curve
Business Cycles
Continuous Wavelet Transform
Partial Wavelet Gain
Issue date2019
PublisherUniversidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
JournalNIPE Working Paper
Abstract(s)We estimate the U.S. New Keynesian Phillips Curve in the time-frequency domain with continuous wavelet tools, to provide an integrated answer to the three most controversial issues on the Phillips Curve. (1) Has the short-run tradeoff been stable? (2) What has been the role of expectations? (3)Is there a long-run tradeoff? First, we find that the short-run tradeoff is limited to some specific episodes and short cycles and that there is no evidence of nonlinearities or structural breaks. Second, households´ expectations captured trend inflation and were anchored until the Great Recession, but not since 2008. Then, inflation over-reacted to expectations at short cycles. Finally, there is no significant long-run tradeoff. In the long-run, inflation is explained by expectations.
TypeWorking paper
Publisher version
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

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