Estimating the Phillips Curve in the Iranian Economy: New Evidence Based on Time-Frequency Analysis

Document Type : Research Paper

Authors

1 Department of Theoretical Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

2 Department of Economics and Accounting, Faculty of Management and Economics, University of Guilan, Rasht, Iran.

3 Department of Economics, Faculty of Business and Economics, Persian Gulf University, Bushehr, Iran.

Abstract

This article utilizes the continuous wavelet transform and its associated tools to provide novel evidence regarding fundamental questions about the Phillips curve in the Iranian economy: slope stability, the role of expectations, and the long-run trade-off. The results indicate that the output gap's impact coefficient on inflation is not constant. Specifically, a positive effect was observed in the short run (2008-2010), while a negative effect was observed in the medium run (2000-2004) and the long run (1995-2004). Inflation expectations positively and significantly influence inflation in both the short and medium runs (2004-2013), but this effect becomes insignificant in the long run. Consequently, the slope of the Phillips curve is deemed unstable: it is negative only in the long run (1995-2004). Therefore, expectations cannot be considered a determining factor for inflation in the long run.

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Main Subjects

References

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Journal of Economic Research (Tahghighat- E- Eghtesadi)
Volume 59, Issue 3 - Serial Number 148
December 2024
Pages 465-494

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History

  • Receive Date: 10 April 2024
  • Revise Date: 30 October 2024
  • Accept Date: 28 December 2024

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