Insights from OECD Phillips curve equations on recent inflation outcomes

Abstract

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 2  ECO/WKP(2019)49 INSIGHTS FROM OECD PHILLIPS CURVE EQUATIONS ON RECENT INFLATION OUTCOMES Unclassified OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.

Monetary and Macroprudential Policy: The Multiplier Effects of Cooperation

“…whereby 𝜋 𝑡 represents the current rate of inflation, 𝛾 is a positive coefficient and 𝜂 𝑆,𝑡 captures the unobservable supply shocks. The assumption of adaptive expectations, as opposed to anchored expectations, is justified by the hypothesis that large and/or persistent shocks might de-anchor inflation expectations (Williams, 2006;Turner et al, 2019), such that a persistent Phillips curve can better capture the long run effects of persistent shocks. Furthermore, we tested an alternative Phillips curve with partially anchored expectations and the qualitative results did not change for positive and non-negligible degrees of persistence 6 .…”