Analysis of Phillips curve during tranquil and recessionary periods
It contains data set for the analysis of Phillips curve during tranquil and recessionary periods
Steps to reproduce
1) Import data for unemployment and inflation into E-views software 2) cpi is current inflation; u is current unemployment; ei is current expectations for future term inflation. Crisis dummy is a dummy variable that gets 1 during recession periods, and zero during tranquil periods. 3) Build two classical Phillips curve equations (backward-looking and forward-looking) separately and integrate crisis dummy in inflation variable as below. backward-looking => cpi(t) = C0*cpi(t-1) + C1*u(t) + C3*Dummy*cpi(t-1) + C4*Dummy*u(t) + error term forward-looking => cpi(t) = C0*ei(t) + C1*u(t) + C3*Dummy*ei(t) + C4*Dummy*u(t) + error term 4) Set HAC standard errors & covariance (Bartlett kernel, Newey-West fixed bandwidth = 5.0000) to overcome autocorrelation and heteroscedasticity issues. 4) Run both eviews regression model for each country separately.