Market Power, NAIRU, and the Phillips Curve

Figure 5

Wavelet coherence. The -axis represents time space while the -axis represents frequency space (defined by quarters). The color coding indicates coherence, with blue and yellow representing low and high coherence, respectively. The regions enclosed by a black line denote statistical significance at the 5% significance level relative to a null hypothesis of a nearly process-independent background power spectrum. The arrows describe phase difference, with arrows pointing leftward signifying antiphase and rightward signifying in-phase. The arrows’ tilt up or down reflects the lead-lag relationship. The cone of influence, represented by the lightly shaded region from the cone outline to the axes, shows areas that may be impacted by edge effects (i.e., effects arising from wavelets stretched beyond the edges of the observation interval); the observed representation of the data in this shaded region should be interpreted with caution.