Is the inflation–output Nexus asymmetric in the Euro area?

Baghli, Mustapha; Cahn, Christophe; Fraisse, Henri

doi:10.1016/j.econlet.2006.04.001

Cited by 23 publications

(18 citation statements)

References 26 publications

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“…The early studies working on euro area aggregate data in the 2000s may face, in our view, the problem that they employ synthetic area aggregate data, often going back to the 1970s, as in Aguiar and Martins (), Baghli et al . () and Musso et al . ().…”

Section: Introductionmentioning

confidence: 89%

“…in Hasanov, Arac and Telatar (2010), Musso, Stracca and van Dijk (2009), Huh, Lee and Lee (2009), Huh and Jang (2007, and Telatar and Hasanov (2006). A third group, not that sizable, has considered the use of non-parametric and semiparametric methods, involving Kernel regression methods, as in Buchmann (2009) and Baghli, Cahn and Fraisse (2007). Most analyses, irrespective of the econometric methods employed, used time series data, possibly involving multi-country datasets, but in general did not consider explicit panel methods.…”

Section: Introductionmentioning

confidence: 99%

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Mind the Output Gap: The Disconnect of Growth and Inflation during Recessions and Convex Phillips Curves in the Euro Area

Gross

Semmler²

2018

Oxf Bull Econ Stat

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We develop a theoretical model that features a business cycle‐dependent relation between output, price inflation and inflation expectations, augmenting the model by Svensson (1997) with a nonlinear Phillips curve that reflects the rationale underlying the capacity constraint theory (Macklem, 1997). The theoretical model motivates our empirical assessment, based on a regime‐switching Phillips curve and a regime‐switching monetary structural VAR, employing different filter‐based, semi‐structural model‐based and Bayesian factor model‐implied output gaps. The analysis confirms the presence of a convex relationship between inflation and the output gap, meaning that the coefficient in the Phillips curve on the output gap recurringly increases during times of expansion and abates during recessions. Sign‐restricted monetary policy shocks based on a regime‐switching monetary SVAR reveal that expansionary monetary policy induces less pressure on inflation at times of weak as opposed to strong growth; thereby rationalizing relatively stronger expansionary policy, including unconventional volume‐based policy, during times of deep recession. A further augmented model shows that an effective euro exchange rate shock, too, implies business cycle state‐dependent responses, with more upward pressure on prices arising from unexpected currency depreciation at times of expansion than during recession phases.

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Section: Introductionmentioning

confidence: 89%

Section: Introductionmentioning

confidence: 99%

Mind the Output Gap: The Disconnect of Growth and Inflation during Recessions and Convex Phillips Curves in the Euro Area

Gross

Semmler²

2018

Oxf Bull Econ Stat

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“…Similar mixed results are reported for European countries. For example, Dolado et al (2005) and Baghli et al (2007) provide some evidence for the relevance of non-linearity in the euro area Phillips curve, while Musso et al (2007) find no significant evidence of non-linearity. curve in excess supply situations differs from that in excess demand situations.…”

Section: Introductionmentioning

confidence: 99%

Capacity Utilisation, Constraints and Price Adjustments Under the Microscope

Lein¹,

Kberl²

2009

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper analyses the interplay of capacity utilisation, capacity constraints, demand constraints and price adjustments, employing a unique firm-level data set for Swiss manufacturing firms. Theoretically, capacity constraints limit the ability of firms to expand production in the short run and lead to increases in prices. Our results show that, on the one hand, price increases are more likely during periods when firms are faced with capacity constraints. Constraints due to the shortage of labour, in particular, lead to price increases. On the other hand, we also find evidence that firms are not reluctant to reduce prices in response to demand constraints. At the macro level, the implied capacity-utilisation Phillips curve has a convex shape during periods of excess demand and a concave shape during periods of excess supply. Our results are robust to the inclusion of proxies for changes in costs and the competitive position of firms. Terms of use: Documents inJEL classification: E31; E32; E52

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“…in a similar manner to the accent nonlinear nature of the Philips Curve but in this paper, we do not discuss the justification of these two views. Some papers discussed the nonlinear Phillips Curve such as Eliasson (2001), Baghli, Christophe, and Henri (2007) and Huh, Lee, and Lee (2008), Greenwood-Nimmo, Van Treeck (2011), Xu, Niu, Jiang, andHuang (2015), Bildirici and Ozaksoy (2017), Donayre and Panovska (2016), Bildirici and Turkmen (2016), Zhang (2017). Eliasson (2001) tested a smooth transition model for Australia, the U.S.A. and Sweden.…”

Section: Introductionmentioning

confidence: 99%

“…Huh et al (2008) analysed an LSTAR model and determined the evidence in support of nonlinearity in the U.S.A. P.C. Baghli et al (2007) showed the evidence of nonlinearity in Europe both at the national level and an aggregate level for Germany, Italy and France. Xu et al (2015) (2017) estimated the nonlinear structure of P.C.…”

Section: Introductionmentioning

confidence: 99%