Balance Sheet Recessions and Time-Varying Coefficients in a Phillips Curve Relationship: An Application to Finnish Data
Research output: Chapter in Book/Report/Conference proceeding › Book chapter › Research › peer-review
Edmund Phelps (1994) introduced a modified Phillips curve where the natural rate of unemployment is a function of the real interest rate instead of a constant. Koo (2010) argues that the effect of the interest rate on the macro economy is likely to be diluted during a balance sheet recession such as those recently seen in many countries. In the late 1980s, after having deregulated credit and capital movements, Finland experienced a housing boom which subsequently developed into a serious economic crisis similar to the recent ones. To learn from the Finnish experience we estimate the Phelps modified Phillips curve and use a Smooth Transition (STR) model to distinguish between ordinary periods and balance sheet recessions.
Original language | English |
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Title of host publication | Essays in Nonlinear Time Series Econometrics |
Number of pages | 31 |
Publisher | Oxford University Press |
Publication date | 2014 |
Chapter | 5 |
ISBN (Print) | 9780199679959 |
DOIs | |
Publication status | Published - 2014 |
- Faculty of Social Sciences - smooth transition model, cointegration, Phillips curve, financial crisis
Research areas
ID: 200963531