Nonlinear Phillips curve, NAIRU and monetary policy rules

Hyeon Seung Huh, Hyun Hoon Lee, Namkyung Lee

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

The US Phillips curve is modeled with a logistic smooth transition autoregression specification that allows various nonlinear shapes. Using this, the paper derives model-consistent estimates of the NAIRU. The NAIRU is defined as the level of unemployment rate that would correspond to a forecast of no inflation changes over the policy horizon. This paper also investigates the implications of nonlinearities in the Phillips curve for deriving optimal monetary policy rules. The optimal policy rule for interest rates and implied sacrifice ratios are found to be nonlinear as well.

Original languageEnglish
Pages (from-to)131-151
Number of pages21
JournalEmpirical Economics
Volume37
Issue number1
DOIs
Publication statusPublished - 2009 Jan 1

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All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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