@article{SomeExplorations:848,
      recid = {848},
      author = {Hogan, Seamus and Pichette, Lise},
      title = {Some Explorations, Using Canadian Data, of the S-Variable  in Akerlof, Dickens, and Perry (1996)},
      publisher = {Bank of Canada},
      address = {2000},
      pages = {1 online resource (v, 29 pages)},
      abstract = {A number of authors have suggested that economies face a  long-run inflation-unemployment trade-off due to downward  nominal-wage rigidity. This theory has implications for the  nature of the short-run Phillips curve when wage inflation  is low. Akerlof, Dickens and Perry have developed an  empirical model in which a variable (S) designed to capture  the effect of downward nominal-wage rigidity is constructed  as part of the estimation of the short-run Phillips curve.  Adding this variable dramatically improves the dynamic  out-of-sample inflation forecasts of the curve in both the  United States and Canada.

In this paper we perform a  variety of tests using both real and constructed data to  address whether the addition of S truly does provide a  better estimate of the short-run Phillips curve, and  whether this constitutes evidence that downward  nominal-wage rigidity increases the natural rate of  unemployment in times of low wage inflation. Our main  conclusion is that the performance of the S-enhanced  Phillips curve in dynamic simulations is independent of  whether downward nominal-wage rigidity is an important  feature of the macroeconomy.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/848},
      doi = {https://doi.org/10.34989/swp-2000-6},
}