In recent years, it has become increasingly common to estimate New Keynesian Phillips curves with a measure of firms' real marginal cost as the real driving variable. It has been argued that this measure is both theoretically and empirically superior to the traditional output gap. In this paper,...

Many empirical studies have found that interest rate have a positive effect on the price level. This paper pursues an obvious, but neglected explanation: interest payments are a cost of production that is at least in part passed on to costumers. A model shows that the cost-push effect of...

Many empirical studies have found that interest rate increases have a positive effect on the price level. This paper pursues an obvious, but neglected explanation: interest payments are a cost of production that is at least in part passed on to customers. A model shows that the cost- push effect...

The New Keynesian Phillips curve implies that the output gap, the deviation of the actual output from its natural level due to nominal rigidities, drives the dynamics of inflation relative to expected inflation and lagged inflation. This paper exploits the empirical success of the New Keynesian...

This paper identifies the output gap using the theoretical definition of the gap within a Phillips curve. The results show that the output gap is large and persistent. Furthermore, the output gap is not correlated with the stochastic trend which is similar to the asumption used in the unobserved...

In this paper we develop a new, simple and, at the same time, general method for the estimation of the rate of capacity utilization (CU). This method draws on the standard theory of economic growth and makes use of the structural vector autoregression (SVAR) system of equations estimating...

This paper documents some stylized facts on evolving UK Phillips curves, and shows how these differ from their US versions. We interpret UK Phillips curve dynamics in a positive theory of monetary policy - how policy-maker attitudes on the Phillips curve have evolved since the 1950s - rather...

In recent years, it has become increasingly common to estimate New Keynesian Phillips curves with a measure of firms' real marginal cost as the real driving variable. It has been argued that this measure is both theoretically and empirically superior to the traditional output gap. In this paper,...

Modern theories of inflation incorporate a vertical long-run Phillips curve and are usually estimated using techniques that ignore the non-stationary behaviour of inflation. Consequently, the estimates obtained are imprecise and are unable to distinguish between competing models of inflation and...

We use univariate GARCH models of inflation and output growth and monthly data on inflation and output growth in the G7 for the 1960-2000 period to examine all possible causal relationships between inflation, output growth, real, and nominal uncertainty, and hence test for a number of economic...