What Determines the Relation Between Output Gap and Inflation?

Undertakes a cross-country study on the price-output gap relationship for selected industrial countries (Japan, the U.S., Germany, the U.K. and Canada). Shows that the price-output gap relationship in these countries can be classified into two categories: (1) a Philips Curve-type (in which the output gap fluctuation affects the inflation rate) ; and (2) a NAIRU type (in which fluctuations in the output gap affect changes in the inflation rate).