Paper #1632

Título:

The Phillips multiplier

Autores:

Régis Barnichon y Geert Mesters

Fecha:

Enero 2019

Resumen:

We propose a model-free approach for determining the inflation-unemployment trade-off faced by a central bank, i.e., the ability of a central bank to transform unemployment into inflation (and vice versa) via its interest rate policy. We introduce the Phillips multiplier as a statistic to non-parametrically characterize the trade-off and its dynamic nature. We compute the Phillips multiplier for the US, UK and Canada and document that the trade-off went from being very large in the pre-1990 sample period to being small (but significant) post-1990 with the onset of inflation targeting and the anchoring of inflation expectations.

Palabras clave:

Marginal rate of transformation, inflation-unemployment, trade-off, dynamic multiplier, Instrumental variables, Phillips curve

Códigos JEL:

C14, C32, E32, E52

Área de investigación:

Macroeconomía y Economía Internacional

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