In this paper, we investigate the nature of structural breaks in inflation by estimating a version of the New Keynesian Phillips curve (NKPC) in the presence of a unit root in inflation. We show that, with a unit root in inflation, the NKPC implies an unobserved components model that consists of...

We find non-linearities in the U.S. long-run relationships among trend inflation, growth rate and financial frictions. Moreover, our results show that mismeasurements of the natural rate of interest deviate the trend inflation from its target, which is especially clear when monetary policy...

This paper studies the effects that conventional and unconventional monetary policies generate when endogenous growth, trend inflation and financial frictions are considered in a New Keynesian macroeconomic model. Financial variables play a key role in the determination of the steady state...

The hybrid New Keynesian Phillips curve has been criticized for lacking a micro-foundation. In this paper, an alternative purely forward-looking model of the Phillips curve is constructed on the basis of a micro-foundation of trend inflation. In addition, another source of output gaps other than...

This study examines the expectational stability of the rational expectation equilibria(REE) under Taylor rules when trend inflation is non-zero. We find that whether or not a higher (lower) trend inflation makes the REE more (less) unstable depends largely on the data (such as contemporaneous...

Recently, it has been argued that trend inflation may be the solution to the puzzle of inflation persistence in the New Keynesian Phillips curve (NKPC). However, incorporating trend inflation into the NKPC raises another serious problem—it lacks a microfoundation. The paper presents a...

This study examines the expectational stability of the rational expectations equilibria (REE) under alternative Taylor rules when trend inflation is non-zero. We find that when trend inflation is high, the REE is likely to be expectationally unstable. This result holds true regardless of the...

There is an extensive historical dataset on real GDP per capita prepared by Angus Maddison. This dataset covers the period since 1870 with continuous annual estimates in developed countries. All time series for individual economies have a clear structural break between 1940 and 1950. The...

This study sheds new light on the cross-sectional effects of inflation, which have substantial implications for stock valuation. I use financial statement analysis to examine systematic stock-valuation effects of aggregate price-level changes on individual companies, focusing on the implications...

Ladislaus von Bortkiewicz has criticized chain indices and Irving Fisher's time and factor reversal tests. However, his arguments (published in German articles) though well ahead of his time and still relevant today are widely fallen in oblivion. He was not the only German statistician who...