Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel Analysis
The empirical literature that covers Phillips Curve analysis during recessionary periods is notably scant. The Great Recession has rekindled a debate on the validity and stability of the Phillips Curve which is still ongoing. The basis for this debate is the observation that real activity dropped sh...
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Istanbul University Press
2019-06-01
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| Series: | İstanbul İktisat Dergisi |
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| Online Access: | https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/F0DC4347BB054E3FB4704B30A8CAC2BA |
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| author | Yhlas Soybetov |
| author_facet | Yhlas Soybetov |
| author_sort | Yhlas Soybetov |
| collection | DOAJ |
| description | The empirical literature that covers Phillips Curve analysis during recessionary periods is notably scant. The Great Recession has rekindled a debate on the validity and stability of the Phillips Curve which is still ongoing. The basis for this debate is the observation that real activity dropped sharply without causing a drop in inflation. This paper carries out an empirical analysis for the classical expectation-augmented Phillips curve model across 41 countries from1980-2016 by distinguishing tranquil and recessionary periods separately. Based on the results of the research, the paper finds that dynamics of Phillips Curve changes during recessionary periods and the empirical relationship becomes no longer valid. These findings support the ongoing debate about the missing disinflation and collapse of the Phillips curve, but only during the recessionary periods. In the case of tranquil periods, the empirical relationship still seems to be valid. Moreover, the paper also observes that both backward-looking and forward-looking fractions of inflation gain weight and significance during recessionary periods. However, the paper remains indecisive about which exact fraction gains more weight and significance as the panel model does not incorporate these two fractions of inflation in a single hybrid framework simultaneously. |
| format | Article |
| id | doaj-art-30d3c53463c643d084d187dba91d52f7 |
| institution | OA Journals |
| issn | 2602-3954 |
| language | English |
| publishDate | 2019-06-01 |
| publisher | Istanbul University Press |
| record_format | Article |
| series | İstanbul İktisat Dergisi |
| spelling | doaj-art-30d3c53463c643d084d187dba91d52f72025-08-20T02:28:32ZengIstanbul University Pressİstanbul İktisat Dergisi2602-39542019-06-01691234110.26650/ISTJECON2019-0016123456Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel AnalysisYhlas Soybetov0https://orcid.org/0000-0001-6321-379Xİstanbul Üniversitesi, İstanbul, TürkiyeThe empirical literature that covers Phillips Curve analysis during recessionary periods is notably scant. The Great Recession has rekindled a debate on the validity and stability of the Phillips Curve which is still ongoing. The basis for this debate is the observation that real activity dropped sharply without causing a drop in inflation. This paper carries out an empirical analysis for the classical expectation-augmented Phillips curve model across 41 countries from1980-2016 by distinguishing tranquil and recessionary periods separately. Based on the results of the research, the paper finds that dynamics of Phillips Curve changes during recessionary periods and the empirical relationship becomes no longer valid. These findings support the ongoing debate about the missing disinflation and collapse of the Phillips curve, but only during the recessionary periods. In the case of tranquil periods, the empirical relationship still seems to be valid. Moreover, the paper also observes that both backward-looking and forward-looking fractions of inflation gain weight and significance during recessionary periods. However, the paper remains indecisive about which exact fraction gains more weight and significance as the panel model does not incorporate these two fractions of inflation in a single hybrid framework simultaneously.https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/F0DC4347BB054E3FB4704B30A8CAC2BAphillips curvepanel analysisunemployment |
| spellingShingle | Yhlas Soybetov Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel Analysis İstanbul İktisat Dergisi phillips curve panel analysis unemployment |
| title | Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel Analysis |
| title_full | Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel Analysis |
| title_fullStr | Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel Analysis |
| title_full_unstemmed | Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel Analysis |
| title_short | Phillips Curve Estimation During Tranquil and Recessionary Periods: Evidence From Panel Analysis |
| title_sort | phillips curve estimation during tranquil and recessionary periods evidence from panel analysis |
| topic | phillips curve panel analysis unemployment |
| url | https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/F0DC4347BB054E3FB4704B30A8CAC2BA |
| work_keys_str_mv | AT yhlassoybetov phillipscurveestimationduringtranquilandrecessionaryperiodsevidencefrompanelanalysis |