tag:blogger.com,1999:blog-2546602206734889307.post5852435607874602203..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Has the Great Recession killed the traditional Phillips Curve?Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2546602206734889307.post-25140697207999498162014-07-16T09:06:40.646+00:002014-07-16T09:06:40.646+00:00Thanks for the reply. I agree that this is an empi...Thanks for the reply. I agree that this is an empirical issue, which is why I think it's interesting to try and infer the actual expectations somehow; even if they might be absurd. This is far from a trivial enterprise of course, and I am not sure how much can be gleaned from aggregated data. <br /><br />PS. I have only gone through the Nason and Smith paper. I find it confusing that they use the expectation operator interchangeably with respect to the probability measure induced by the real process and that of the forecaster. This seems to imply quite strong assumptions, but I am not an economist. Maybe it's something common.Christos Dimitrakakishttps://www.blogger.com/profile/02379106463240929838noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-43891741004331777742014-07-15T20:05:08.707+00:002014-07-15T20:05:08.707+00:00I do not think same as last year is a rational cho...I do not think same as last year is a rational choice, when you have an inflation targeting central bank. Assuming that inflation is at target next year is putting too much faith in the central bank, but to ignore the goals of the central bank altogether seems very odd. If you read the linked piece on rational expectations, you will see why I like this as a starting point rather than something simple like the same as last year. But this is ultimately an empirical issue, which is why I though this empirical evidence is interesting.<br />Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64540264286401082002014-07-15T19:48:50.723+00:002014-07-15T19:48:50.723+00:00Yes, at least for the two choices of expectations....Yes, at least for the two choices of expectations.<br /><br />Isn't "same as last year" a reasonable choice? As you say on your linked post: "We could probably get any pattern to fit the NK model by imagining a suitable sequence of expectations errors". I am probably going off on a tangent here, but what would reasonable expectations be?<br /><br />PS. Are the two linked articles a reasonable resource to get sufficient background information? Christos Dimitrakakishttps://www.blogger.com/profile/02379106463240929838noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-88793212532907727302014-07-15T15:25:26.448+00:002014-07-15T15:25:26.448+00:00I will have a look at the Ball reference. On the l...I will have a look at the Ball reference. On the latter, I should have added that Krugman's interpretation can be seen as one of my two polar cases of the NKPC - and I've made this point in the main text as a postscript. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86409834678475332272014-07-15T15:23:23.211+00:002014-07-15T15:23:23.211+00:00If you like, what this evidence shows is that such...If you like, what this evidence shows is that such a restriction is not suggested by the data.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-90690346152393595262014-07-15T09:20:28.275+00:002014-07-15T09:20:28.275+00:00I forgot to add that Krugman graphed the US Apr 9,...I forgot to add that Krugman graphed the US Apr 9, 2014, 'Low Inflation and Structural Illusions (Wonkish)' and put forward that "In fact, I’ve pointed out in the past that if you restrict yourself to Great Moderation-era data, what you seem to find is an old-fashioned, non-accelerationist Phillips curve. Furthermore, recent experience is consistent with that curve...I’d like to see someone do some more formal testing here, estimating Phillips curves on some rolling basis. My strong bet is that the coefficient on lagged inflation, which is forced to be 1 in the Krueger et al work, “wants” to be a lot less than 1 in recent decades."<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55357044434101110662014-07-15T09:09:10.858+00:002014-07-15T09:09:10.858+00:00What of 'Inflation Dynamics and the Great Rece...What of 'Inflation Dynamics and the Great Recession' by Laurence Ball and Sandeep Mazumder May 2011 in which they say "we show that the Great<br />Recession provides fresh evidence against the New Keynesian Phillips curve with rational<br />expectations"?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5344543938511650232014-07-15T07:38:23.039+00:002014-07-15T07:38:23.039+00:00I am not sure that I follow how the model selectio...I am not sure that I follow how the model selection is formulated here. Doesn't the FPPC emerge as a special case of the NKPC (i.e. for a particular choice of prior for the agents' beliefs)? It would be nice to look at this in a bit more detail.Christos Dimitrakakishttps://www.blogger.com/profile/02379106463240929838noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-90891729617764819282014-07-14T17:23:04.067+00:002014-07-14T17:23:04.067+00:00oh dear you have forgotten the Phillips curve is j...oh dear you have forgotten the Phillips curve is just a mis-specified wage curve....<br />Danny BlanchflowerAnonymousnoreply@blogger.com