Simple Phillips Curve Model Estimation

[obviou191]

Hi everyone,

I was wondering if I could get any advice/comments on the following. I am looking to run a simple Phillips curve model from 1980 to 2010 using quarterly data. I have selected my dependent variable (which is obviously inflation) along with two independent variables of lagged inflation and the output gap. I have completed the necessary unit root test etc. I then ran the following in Eviews....

ls inflation c inflation(-1) output_gap

I was just wondering if this is the correct command for such a model. The results I returned with look pretty good, just want to ensure I have taken the correct approach.

Any feedback would be great,

Thanks,
Carlos

[startz]

You should probably correct for serial correlation. There is also the question of whether either of the RHS variables are correlated with the error term.

[obviou191]

Startz,

Thanks or your reply. I have corrected for serial correlation by adding lagged values to all variables. Is this sufficient?
Thanks

[startz]

You should test for remaining serial correlation using the test under residual diagnostics.