The Inflation and Output-Gap Tradeoff Debate Revisited

UNCP Author/Contributor (non-UNCP co-authors, if there are any, appear on document)
Dr.. Mohammad Ashraf, Professor of Economics (Creator)
Institution
The University of North Carolina at Pembroke (UNCP )
Web Site: http://www.uncp.edu/academics/library

Abstract: In this study we use four different measures of the US output to test the hypothesis of positive correlation between output-gap and wage inflation using the Phillips curve type models. We measure output gap using a constant natural level of output as well as the Kalman filter where natural level of output changes over time. Using the total real GDP or the service sector data the results did not support the hypothesis. However, we found an overwhelming evidence of positive correlation between output gap and wage inflation in the case of durable goods industries. Our results suggest that the requiem of Phillips curve may be premature.

Additional Information

Publication
Language: English
Date: 2005
Keywords
Output Gap, Wage Inflation, Gross Domestic Product, Kalman Filter, Phillips Curve, Mohabbat, Khan A.