Palgrave Handbook of Econometrics: Applied Econometrics

S.G.B. Henry 939

0.0

0.2

0.4

0.6

0.8

1.0

1.2

(a) (b)

(c)

(e)

(d)

1 112131415161718191101

Period

8.0

8.5

9.0

9.5

10.0

10.5

11.0

1 112131415161718191101

Period

–1

0

1

2

3

4

5

6

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101

Period

–1

–0.9

–0.8

–0.7

–0.6

–0.5

–0.3

–0.4

–0.2

–0.1

0

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101

Period

–0.003

–0.002

–0.001

0.000

0.001

0.002

0.003

1 112131415161718191101

Period

Figure 18.4 (a)δ 1 t, (b)δ 2 t, (c)γ 0 t, (d)γ 1 t, (e) Inflation surprises (ν 2 t)

fluctuate around a fairly constant level, before changing sharply after about 75
quarters; these beliefs becoming more optimistic about the inflation consequences
of reduced unemployment.

18.5.2.3 Relating the results to the UK since 1980

In keeping with this branch of the Beliefs literature, the main features of the
dynamic solutions for inflation just given are related to events in the UK economy