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Supply, Factor Shares and Inflation Persistence: Re-examining Euro-area New-Keynesian Phillips Curves

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  • Peter McAdam
  • Alpo Willman

Abstract

Using euro-area data, we re-examine the empirical success of New-Keynesian Phillips curves (NKPCs). We re-estimate with a suitably specified optimizing supply side (which attempts to treat non-stationarity in factor income shares and mark-ups) that allows us to derive estimates of technology parameters, marginal costs and 'price gaps'. Our resulting estimates of the euro-area NKPCs are robust, provide reasonable estimates for fixed-price durations and discount rates and embody plausible dynamic properties. Our method for identifying the underlying determinants of NKPCs has general applicability to a wide set of countries as well as of use for sectoral studies. Copyright 2004 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 66 (2004)
Issue (Month): s1 (09)
Pages: 637-670

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Handle: RePEc:bla:obuest:v:66:y:2004:i:s1:p:637-670

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Cited by:
  1. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Harvard Institute of Economic Research Working Papers 1922, Harvard - Institute of Economic Research.
  2. McNelis, Paul & McAdam, Peter, 2004. "Forecasting inflation with thick models and neural networks," Working Paper Series 0352, European Central Bank.
  3. Alfonso Arpaia & Esther Pérez & Karl Pichelmann, 2009. "Understanding Labour Income Share Dynamics in Europe," European Economy - Economic Papers 379, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Christopher Tsoukis & George Kapetanios & Joseph Pearlman, 2011. "Elusive Persistence: Wage And Price Rigidities, The New Keynesian Phillips Curve And Inflation Dynamics," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 737-768, 09.
  5. Juselius, Mikael, 2008. "Testing the New Keynesian Model on U.S. and Euro Area Data," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(24), pages 1-26.
  6. McAdam, Peter & Willman, Alpo, 2007. "State-dependency and firm-level optimization: a contribution to Calvo price staggering," Working Paper Series 0806, European Central Bank.
  7. Ken Kuttner & Tim Robinson, 2008. "Understanding the Flattening Phillips Curve," Department of Economics Working Papers 2008-15, Department of Economics, Williams College.
  8. Peter Mcadam & Alpo Willman, 2010. "Arrow-Calvo Price Staggering," Manchester School, University of Manchester, vol. 78(6), pages 556-581, December.
  9. Peter McAdam, 2007. "USA, Japan and the Euro Area: Comparing Business-Cycle Features," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 135-156.
  10. Julien Matheron, 2006. "Firm-Specific Labor and Firm-Specific Capital: Implications for the Euro-Data New Phillips Curve," International Journal of Central Banking, International Journal of Central Banking, vol. 2(4), December.
  11. Mestre, Ricardo & McAdam, Peter, 2008. "Is forecasting with large models informative? Assessing the role of judgement in macroeconomic forecasts," Working Paper Series 0950, European Central Bank.
  12. Engelbert Stockhammer & Dimitris P. Sotiropoulos, 2012. "The costs of rebalancing the Euro area," Working Papers PKWP1206, Post Keynesian Economics Study Group (PKSG).

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