Testing the Nonlinearity of the Phillips Curve. Implications for Monetary Policy
This paper studies the nonlinearity of the Phillips Curve and its implications for monetary policy. To investigate the trade-off between output gap and inflation volatility we used a backward-looking model type. The data for our empirical analysis is obtained from the Area Wide Model (AWM) Database...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2010-04-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/463.pdf
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| Summary: | This paper studies the nonlinearity of the Phillips Curve
and its implications for monetary policy. To investigate the trade-off between
output gap and inflation volatility we used a backward-looking model type.
The data for our empirical analysis is obtained from the Area Wide Model
(AWM) Database (from 1970 to 2008 for Euro area) and National Institute
of Statistics (from 2000 to 2009 for Romania) and has quarterly frequency.
The results of econometric tests indicate a significant estimated coefficient of
the output gap for Romania, compared with the Eurozone; we find no
significant evidence of nonlinearity of the Phillips curve in the European
Monetary Union. This suggests that the optimal choice for European Central
Bank should be a fixed inflation targeting, while the National Bank of
Romania’s monetary policy strategy should aim a flexible inflation targeting. |
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| ISSN: | 1841-8678 1844-0029 |