Potential Output, the Natural Rate of Unemployment, and the Phillips Curve in a Multivariate Structural Time Series Framework

Hahn, Franz and Rünstler, Gerhard (June 1996) Potential Output, the Natural Rate of Unemployment, and the Phillips Curve in a Multivariate Structural Time Series Framework. IHS Economics Series 33

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Abstract or Table of Contents

Abstract: We propose a bivariate structural time series framework to decompose GDP and the unemployment rate into their trend, cyclical, and irregular components. We implement Okun's law by a generalised version of the common cycles restriction allowing for a phase shift between the two cycles and add a price-wage block to the system. We estimate by maximum likelihood Phillips curve-type equations, where the particular cycles enter the wage and price equations in levels though the trends are modelled as non-stationary stochastic processes. The extended models provide an improved estimate of the current cyclical position, compared to univariate estimates and the HP filter.;

Item Type: IHS Series
Keywords: 'Structural Time Series Model' 'Trends and Cycles' 'Phillips Curve'
Classification Codes (e.g. JEL): C22, E30
Status: Published
Date Deposited: 26 Sep 2014 10:36
Last Modified: 04 Apr 2016 01:08
URI: http://irihs.ihs.ac.at/id/eprint/913

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