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    The Phillips Curve, the persistence of inflation and the Lucas Critique

    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.

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    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.


    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


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