Theoretical and Applied Economics
No. 2 / 2019 (619), Summer
Empirical examination of the stability of expectations – Augmented Phillips Curve for developing and developed countries
Istanbul University, Turkey
Muhittin KAPLAN
Istanbul University, Turkey
Abstract. The empirical literature provides mixed results on the relationship between inflation and unemployment; therefore, there is no consensus on validity and stability of the Phillips Curve. It also seems to be closely related with country-specific factors and the examination time periods. Considering the importance of this trade-off for policy-makers, this study aims to examine validity and stability of expectations-augmented Phillips Curve across 41 countries focusing on three different time periods between 1980 and 2016. The study documents several findings both in country-specific and in panel estimation analysis. First, we find that forward-looking characteristic of inflation picks up weight after 1990’s which indicates that inflation became more sensitive to the expected prices. Second, we observe that inflation in developed markets is more forward-looking comparing to emerging and frontier markets. This indicates that developed markets dear forward-looking price expectations more than other markets. Third, we find that that both forward- and backward-looking Phillips Curve fails to work in Brazil, Greece, Indonesia, Mexico, South Africa, Romania, and Turkey. We address it to their long history of high and volatile inflation.
Keywords: Phillips curve, inflation dynamics, unemployment, rational expectations, anchored expectations, developed markets, emerging markets, frontier markets.
Contents
- The education and training.
Priorities of the European Union
Constantin ANGHELACHE
Gabriela Victoria ANGHELACHE
Mădălina Gabriela ANGHEL
- Posted offers in exogenous networks:
A theoretical application and experimental results
Lisa BREGER
Andrea SORENSEN
- The role of Japan in the development
of emerging markets in Asia.
Key lessons learned for China
Ionela VOINEA
- Empirical examination of the stability of expectations –
Augmented Phillips Curve for developing
and developed countries
Yhlas SOVBETOV
Muhittin KAPLAN
- The causality between economic growth and stock market
in developing and developed countries:
Toda-Yamamoto approach
Bilgehan TEKIN
Erol YENER
- Government failure vs. Market failure.
The implications of incomplete information
Rareș Petru MIHALACHE
Dumitru Alexandru BODISLAV
- Foreign direct investment
and total factor productivity in South Asia
Zaira ADNAN
Mamta CHOWDHURY
Girijasankar MALLIK
- Exploring the nexus between macroeconomic variables
and stock market returns in Germany:
An ARDL Co-integration approach
Riadh El ABED
Amna ZARDOUB
- Exchange rate regimes and its impact on growth:
An empirical analysis of BRICS countries
Babu Rao G.
- Dynamics of business cycle
and long-term economic growth of Pakistan
Usama Ehsan KHAN
Syed Monis JAWED
- Per capita gross domestic product
and welfare of Gabonese households:
A VAR model with exogenous hypothesis
Giscard ASSOUMOU-ELLA
- Co-integration with regime shift between government
expenditure and poverty reduction in Algeria
Hicham AYAD
- Trade in a two sector endogenous growth model
with two accumulating factors
Birgit KIRSCHBAUM-BEHL
- What discriminates the welfare outcomes of children in India.
A multiple discriminant analysis in selected states
Atul MEHTA
Joysankar BHATTACHARYA