The Phillips curve and the role of monetary policy in Chile
In this paper, the empirical analysis finds that the dynamics of inflation and unemployment can be described by a Phillips curve when allowing for a positive co-movement between trend-adjusted productivity and unemployment. This suggests that improvements in productivity have been achieved by laying...
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2019-01-01
|
| Series: | Journal of Applied Economics |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/15140326.2018.1526865 |
| _version_ | 1818023696421355520 |
|---|---|
| author | Leonardo Salazar |
| author_facet | Leonardo Salazar |
| author_sort | Leonardo Salazar |
| collection | DOAJ |
| description | In this paper, the empirical analysis finds that the dynamics of inflation and unemployment can be described by a Phillips curve when allowing for a positive co-movement between trend-adjusted productivity and unemployment. This suggests that improvements in productivity have been achieved by laying off the least productive part of the labor force. Furthermore, the natural rate of unemployment is a function of the long-term interest rate, indicating that monetary policy is not completely neutral in the long run. This result rejects the natural rate hypothesis and, at the same time, provides empirical support for the structural slump theory in a world of imperfect knowledge. The recent theory of imperfect knowledge economics (IKE) seems to address the problem that many economic models lack: persistence in the observed data. By combining IKE and the structural slumps theory it is possible to obtain predictions that are theoretically and empirically consistent. |
| first_indexed | 2024-12-10T03:48:25Z |
| format | Article |
| id | doaj.art-f22f07d0529e49429841d95dd7fcadc9 |
| institution | Directory Open Access Journal |
| issn | 1514-0326 1667-6726 |
| language | English |
| last_indexed | 2024-12-10T03:48:25Z |
| publishDate | 2019-01-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Journal of Applied Economics |
| spelling | doaj.art-f22f07d0529e49429841d95dd7fcadc92022-12-22T02:03:21ZengTaylor & Francis GroupJournal of Applied Economics1514-03261667-67262019-01-0122112210.1080/15140326.2018.15268651526865The Phillips curve and the role of monetary policy in ChileLeonardo Salazar0University of ConcepciónIn this paper, the empirical analysis finds that the dynamics of inflation and unemployment can be described by a Phillips curve when allowing for a positive co-movement between trend-adjusted productivity and unemployment. This suggests that improvements in productivity have been achieved by laying off the least productive part of the labor force. Furthermore, the natural rate of unemployment is a function of the long-term interest rate, indicating that monetary policy is not completely neutral in the long run. This result rejects the natural rate hypothesis and, at the same time, provides empirical support for the structural slump theory in a world of imperfect knowledge. The recent theory of imperfect knowledge economics (IKE) seems to address the problem that many economic models lack: persistence in the observed data. By combining IKE and the structural slumps theory it is possible to obtain predictions that are theoretically and empirically consistent.http://dx.doi.org/10.1080/15140326.2018.1526865unemploymentinflationphillips curvestructural slumpsimperfect knowledge |
| spellingShingle | Leonardo Salazar The Phillips curve and the role of monetary policy in Chile Journal of Applied Economics unemployment inflation phillips curve structural slumps imperfect knowledge |
| title | The Phillips curve and the role of monetary policy in Chile |
| title_full | The Phillips curve and the role of monetary policy in Chile |
| title_fullStr | The Phillips curve and the role of monetary policy in Chile |
| title_full_unstemmed | The Phillips curve and the role of monetary policy in Chile |
| title_short | The Phillips curve and the role of monetary policy in Chile |
| title_sort | phillips curve and the role of monetary policy in chile |
| topic | unemployment inflation phillips curve structural slumps imperfect knowledge |
| url | http://dx.doi.org/10.1080/15140326.2018.1526865 |
| work_keys_str_mv | AT leonardosalazar thephillipscurveandtheroleofmonetarypolicyinchile AT leonardosalazar phillipscurveandtheroleofmonetarypolicyinchile |