posted on 2007-07-10, 12:33authored byPaul M. Turner
This paper seeks to demonstrate that a backward looking specification of the IS curve using UK data can encompass the forward looking model recently discussed by Kara and Nelson (2004). By relaxing the restriction that the interest rate and the inflation rate enter the IS curve with coefficients of equal magnitude but opposite sign, we obtain IS curve estimates which are empirically plausible and which encompass the rival specification.
History
School
Business and Economics
Department
Economics
Publication date
2007
Notes
This is a working paper and is also available at: http://ideas.repec.org/p/lbo/lbowps/2007_16.html.