We analyse a cointegrated VAR comprising UK data on consumer prices, unit labour costs, import prices and real consumption growth. The nominal variables, treated as I(2) here, form a linearly homogeneous relation, suggesting a transformation of the system to one comprising inflation and relative...

Estimated characteristic roots in stationary autoregressions are shown to give rather noisy information about their population equivalents.  This is remarkable given the central role of the characteristic roots in the theory of autoregressive processes.  In the asymptotic analysis the problems...

Empirical models of inflation often incorporate equilibrium correction effects based upon levels of prices and input costs. Such models assume that the steady-state price-cost markup is constant, but recent research suggests that this may not be true for the Euro area economy, which has...

Boschen and Weise (Journal of Money, Credit and Banking, 2003) model the probability of a large upturn in inflation. We extend their work to show that openness to trade exerts a negative e¤ect on the probability of such an event.

Standard open economy models predict that openness to trade should exert a positive effect on the slope of the output-inflation tradeoff, or Phillips curve, but such a proposition finds very little support in the existing empirical literature. We propose a new test of this hypothesis based on...

A number of thoretical models predict that the slope of the Phillips curve increases with trade openness, but cross-country studies provide little evidence for such a correlation. We highlight two reasons for this finding. Firstly, the strength of the relationship may depend on the extent of...

We argue that endogenous and anticipated movements in interest rates lead to underestimates of the speed and magnitude of the exchange rate response to monetary policy. Employing the Romer and Romer (2004) exogenous monetary policy shock measure, we find that the effect of a one percentage point...