This comment discusses the presence of Phillips-curve effects for the UK, 1860-2004. A reconsideration of the empirical evidence in Castle and Hendry (2009) seems to suggest different functional relationships between wage inflation and unemployment for different periods. We conclude that the...

We propose a discrete-time multivariate model where lagged levels of the process enter both the conditional mean and the conditional variance. This way we allow for the empirically observed persistence in time series such as interest rates, often implying unit-roots, while at the same time...