We propose a noncausal autoregressive model with time-varying parameters, and apply it to U.S. postwar inflation. The … model .fits the data well, and the results suggest that inflation persistence follows from future expectations. Persistence … curve indicate that current inflation also depends on past inflation although future expectations dominate. The implied …

labor input, but it predicts a strong counterfactually negative long run relationship between inflation and unemployment …. This finding is robust to including a microeconomically realistic degree of indexation of wages to inflation. The lack of a … negative long run relationship between trend inflation and unemployment provides indirect evidence against the proposed …