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A bounded model of time variation in trend inflation, Nairu and the Phillips curve

Chan, Joshua C. C.; Koop, Gary; Potter, Simon M.


In this paper, we develop a bivariate unobserved components model for inflation and unemployment. The unobserved components are trend inflation and the non-accelerating inflation rate of unemployment (NAIRU). Our model also incorporates a time-varying Phillips curve and time-varying inflation persistence. What sets this paper apart from the existing literature is that we do not use unbounded random walks for the unobserved components, but rather bounded random walks. For instance, NAIRU is...[Show more]

CollectionsANU Research Publications
Date published: 2015
Type: Journal article
Source: Journal of Applied Econometrics
DOI: 10.1002/jae.2442


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