Chart 3. Inflation-unemployment cross-plot
Unemployment
3.2 Trend Inflation, Steady-State Inflation and Inflation Persistence
Our benchmark univariate model of the inflation process regresses current inflation on
a constant term and three lags of both inflation and the unemployment rate. A
Bayesian approach is taken for the estimation. We start from an appropriate but
weakly informative prior, and use the 1980s as a pre-sample to update it. We report
the results from 1990m1 onwards, therefore including the period immediately before
the Maastricht Treaty, the convergence period to meet the requirements of the Treaty,
and the first decade of EMU. After the estimation, and in order to check whether there
is time variation in the relevant parameters of the models, we perform ADF tests on
trend inflation, inflation persistence and the sum of the coefficients of unemployment.
Table 1. Tests for time variation
|
_______________________Coefficients of AR component_______________________ | |||
|
Constant |
Sum(πt-1, ∏t-2, πt-3) |
Sum(ut-1, ut-2, ut-3) | |
|
ADF test (p-value) |
-2.072 (0.256) |
-1.558 (0.503) |
-2.528 (0.110) |
|
____________________Coefficients of GARCH component____________________ | |||
|
_________________h_ |
___________________a |
__________________λ. | |
|
Parameter values |
____________0.0005 |
0.0796 |
____________0.9161 |
|
T-stats based on |
1.36 |
3.42* |
37.98** |
|
__________________Squared standardized residuals serial correlation__________________ | |||
|
___________LB(1) |
___________LB(2) |
___________LB(3) |
___________LB(4) |
|
_______________2.59 |
_______________5.69 |
_______________6.95 |
_______________7.06 |
More intriguing information
1. Ronald Patterson, Violinist; Brooks Smith, Pianist2. Wirkung einer Feiertagsbereinigung des Länderfinanzausgleichs: eine empirische Analyse des deutschen Finanzausgleichs
3. Can we design a market for competitive health insurance? CHERE Discussion Paper No 53
4. The name is absent
5. Why Managers Hold Shares of Their Firms: An Empirical Analysis
6. The name is absent
7. The name is absent
8. Optimal Taxation of Capital Income in Models with Endogenous Fertility
9. Firm Creation, Firm Evolution and Clusters in Chile’s Dynamic Wine Sector: Evidence from the Colchagua and Casablanca Regions
10. Short- and long-term experience in pulmonary vein segmental ostial ablation for paroxysmal atrial fibrillation*