On the empirical relevance of the Lucas supply curve. (A note)

Claude Bismut (1) , Ismael Ramajo (1)

1 CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010

In this paper we extend the usual Lucas supply curve to allow the likely external influence on inflation, together with domestic conditions. We test the relationship between the inflation surprise, the output gap and the real exchange rate using simple time series regressions on annual data for a list of 16 developed countries. These tests confirm the empirical relevance of the Lucas supply curve but also support the assumption that part of the inflation surprise may come from unexpected variations of the real exchange rate.

Mots clés: inflation surprise imported inflation; output gap; natural rate of unemployment; Lucas supply curve

Domaines: Economies et finances

Claude Bismut, Ismael Ramajo. On the empirical relevance of the Lucas supply curve. (A note). 2018. ⟨hal-01954918⟩