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Inflation dynamics and the output‐inflation trade‐off: international panel data evidence

Research output: Contribution to journalArticle

Dimitrios Bakas, Georgios Chortareas

Original languageEnglish
Pages (from-to)2110-2124
Number of pages15
JournalECONOMIC INQUIRY
Volume57
Issue number4
Early online date29 Apr 2019
DOIs
Publication statusE-pub ahead of print - 29 Apr 2019

King's Authors

Abstract

We explore the impact of inflation and its variability on the output-inflation trade-off using a single-step approach in a panel data context. Previous empirical approaches focus on either cross-country or country-by-country time-series analyses. We employ a dynamic heterogeneous panel specification using an all-encompassing estimation framework accounting for parameter heterogeneity, cross-sectional dependence, dynamics, and nonstationarity. Our sample covers 60 countries from 1970 to 2010. While inflation variability reduces the trade-off for specific periods and country groups, an unambiguous and more pronounced negative relation emerges between the inflation rate and the trade-off. The findings are consistent with the New Keynesian view. (JEL E31, E12, C23).

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