A review of the Phillips Curve in Bolivia
DOI:
https://doi.org/10.35319/lajed.202135442Keywords:
Phillips Curve, Generalized Method of Moments, recursive regressionsAbstract
This paper conducts exploratory empirical research on the status of the slope of the Phillips curve for the Bolivian economy with quarterly data, for the period between 1992Q2–2019Q4, using the Generalized Method of Moments (GMM) with recursive regressions. For this purpose, an output gap consistent with economic theory was estimated. The results show
that the output gap has a positive and significant effect on inflation in the short term, so the Phillips Curve does hold. Furthermore, the link between inflation and the business cycle has
been strengthened in recent years. Although inflationary inertia is the main determinant in price formation, the importance of expectations increased over time. The effect of the external sector decreased in the last five years.
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