CHANG‐JIN KIM; MANOPIMOKE, PYM; NELSON, CHARLES R. - In: Journal of Money, Credit and Banking 46 (2014) 2-3, pp. 253-266
We show that with a unit root in inflation, the new Keynesian Phillips curve (NKPC) implies an unobserved components model with a stochastic trend component and an inflation gap. Our empirical results suggest that with an increase in trend inflation during the Great Inflation, the response of...