Alogoskoufis, G. and Smith, Ron P. (1991) The Phillips Curve, the persistence of inflation and the Lucas Critique. American Economic Review 81 (5), pp. 1254-1275. ISSN 0002-8282.
Abstract
The authors present evidence from the United States and the United Kingdom that the persistence of price inflation is significantly higher under managed-exchange-rate regimes than under gold-based, fixed-exchange-rate regimes. These differences are also reflected in expectations-augmented Phillips curves. The authors use a two-country macro model, with forward-looking price setters, to demonstrate that higher monetary accommodation of inflation and exchange-rate accommodation of inflation differentials increase inflation persistence. The evidence does not contradict this hypothesis. It supports the hypothesis of forward-looking price setters and highlights the empirical significance of the Lucas critique.
Metadata
| Item Type: | Article |
|---|---|
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Sarah Hall |
| Date Deposited: | 31 Aug 2020 18:54 |
| Last Modified: | 02 Aug 2023 18:03 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/40690 |
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