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2019, vol. 16, iss. 2, pp. 139-154
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Causes of failure of the Phillips curve: Does tranquillity of economic environment matter?
Uzroci neuspeha Filipsove krive - da li je bitno da ekonomsko okruženje ne oscilira?
Abstract
Although empirical literature regarding the Phillips curve is sizeable enough, there is still no wide consensus on its validity and stability. The literature shows that the Phillips relationship is fragile and varies across countries and time periods; a statistical relationship that appears strong during one decade (country) may be weak the next (other). This variability might have some grounds for idiosyncrasy of a country and its economic environment. To address it, this paper scrutinizes the Phillips relationship over 41 countries over the period 1980-2016, paying attention to how inflation dynamics behave during tranquil and recessionary periods. As a result, the paper confirms the variability of the Phillips relationship across countries, as well as time periods. It documents that the relationship holds in the majority of developed countries, while it fails to hold in emerging and frontier economies during tranquil periods. On the other hand, the relationship totally collapses during recessionary periods, even in developed markets. This shows that tranquillity of economic environment is significantly important for the Phillip trade-off to work smoothly. Moreover, both backwardand forward-looking fractions of inflation remarkably increase during recessionary periods as a result of the Phillips coefficient loses its significance within the model. This indicates that markets become more inflation-sensitive during these periods.
Sažetak
Iako je empirijska literatura koja se odnosi na Filipsovu krivu (the Phillips curve) značajnog obima, i dalje ne postoji konsenzus o validnosti i stabilnosti iste. U literaturi se navodi da je Filipsov odnos nestalan i da je drugačiji od zemlje do zemlje i u različitim vremenskim periodima; statistički odnos koji se u toku jedne decenije (u nekoj zemlji) čini jakim, može biti slab u narednoj/nekoj drugoj. Razlozi za ovu nestalnosti mogu biti osnova za osobenosti neke zemlje i njenog ekonomskog okruženja. Kako bismo se pozabavili ovom temom, u radu smo detaljno istražili Filipsov odnos u 41 zemlji tokom perioda 1980-2016, obraćajući pažnju na dinamiku inflacije tokom perioda bez većih oscilacija i recesije. Kao rezultat, u radu je zaključeno da Filipsov odnos varira, u zavisnosti od zemlje i vremenskog perioda. Dokazano je da je taj odnos važeći za većinu razvijenih zemalja, dok nije primenjiv u zemljama u razvoju i nerazvijenim zemljama, tokom perioda bez većih oscilacija. S druge strane, odnos je nepostojeći tokom perioda recesije, čak i na razvijenim tržištima. Ovo dokazuje da je period bez većih oscilacija u ekonomskom okruženju od izuzetnog značaja, kako bi Filipsov balans funkcionisao bez problema. Štaviše, frakcije - očekivane inflacije i inflacije u prethodnom periodu, značajno se uvećavaju tokom perioda recesije kao rezultat toga što Filipsov koeficijent gubi na značaju u okviru modela. Ovo ukazuje na činjenicu da su tržišta osetljivija na inflaciju tokom ovih perioda.
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