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A time-varying volatility approach to modeling the phillips curve: A cross-country analysis

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Abstract

This research examines the Phillips curve price adjustment mechanism allowing for the conditional variance of inflation to be time varying. Specifically, we estimate ARCH and GARCH models of inflation for Canada, Japan, and the U.K. The results suggest that an increase in the conditional variability of inflation leads to higher levels of inflation. In addition, inclusion of inflation variability in the Phillips curve model results in a higher weight being attributed to the output gap than in traditional models. (JEF E24)

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Authors and Affiliations

  1. Department of Accounting, Finance, and Economics, Winthrop University, 29733, Rock Hill, SC

    William L. Seyfried (Associate Professor of Economics)

  2. Area of Information Systems and Quantitative Science, Rawls College of Business, Texas Tech University, 79409-2101, Lubbock, TX

    Bradley T. Ewing (Professor of Operations Management)

Authors
  1. William L. Seyfried
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  2. Bradley T. Ewing
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Correspondence to William L. Seyfried.

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Seyfried, W.L., Ewing, B.T. A time-varying volatility approach to modeling the phillips curve: A cross-country analysis. J Econ Finan 28, 186–197 (2004). https://doi.org/10.1007/BF02761610

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