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An Open-Economy New Keynesian Phillips Curve: Evidence From Hong Kong

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  • Hans Genberg
  • LaurentL. Pauwels

Abstract

This paper extends the new hybrid Keynesian Phillips Curve (NKPC) to the open-economy context. We hypothesize that pricing decisions depend on both labour costs and intermediate imported input prices. The results for Hong Kong are consistent with the theory if import prices are given substantial weight in measuring marginal cost, rejecting the labour costs model. We find that forward-looking behaviour is dominant, and that price stickiness is smaller in Hong Kong than in the USA. The results are sensitive to the choice of instruments, and a model using the output gap instead of marginal cost as the forcing variable also performs well. Copyright 2005 Blackwell Publishing Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Pacific Economic Review.

Volume (Year): 10 (2005)
Issue (Month): 2 (06)
Pages: 261-277

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Handle: RePEc:bla:pacecr:v:10:y:2005:i:2:p:261-277

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1361-374X

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Cited by:
  1. Michael Funke & Michael Paetz & Ernest Pytlarczyk, 2010. "Stock market wealth effects in an estimated DSGE model for Hong Kong," Quantitative Macroeconomics Working Papers 21009, Hamburg University, Department of Economics.
  2. Michael Cheng & Wai-Yip Alex Ho, 2009. "A Structural Investigation into the Price and Wage Dynamics in Hong Kong," Working Papers 0920, Hong Kong Monetary Authority.
  3. Agenor, Pierre-Richard & Bayraktar, Nihal, 2003. "Contracting models of the Phillips curve - empirical estimates for Middle-income countries," Policy Research Working Paper Series 3139, The World Bank.
  4. Somayeh Mardaneh, 2012. "Inflation Dynamics in a Dutch Disease Economy," Discussion Papers in Economics 12/25, Department of Economics, University of Leicester.
  5. Borek Vasícek, 2009. "Inflation dynamics and the New Keynesian Phillips curve in EU-4," Working Papers wpdea0912, Department of Applied Economics at Universitat Autonoma of Barcelona.
  6. Pami Dua & Upasna Gaur, 2010. "Determination of inflation in an open economy Phillips curve framework: the case of developed and developing Asian countries," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 3(1), pages 33-51.
  7. Blagov , Boris & Funke, Michael, 2013. "The regime-dependent evolution of credibility: A fresh look at Hong Kong’s linked exchange rate system," BOFIT Discussion Papers 24/2013, Bank of Finland, Institute for Economies in Transition.
  8. Vararat Khemangkorn & Roong Poshyananda Mallikamas & Pranee Sutthasri, 2008. "Inflation Dynamics and Implications on Monetary Policy," Working Papers 2008-02, Economic Research Department, Bank of Thailand.
  9. Michael K. Salemi, 2007. "Long-run and Cyclic Movements in the Unemployment Rate in Hong Kong: A Dynamic, General Equilibrium Approach," Working Papers 192007, Hong Kong Institute for Monetary Research.

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