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The New Keynesian Phillips Curve For The Euro Area: Which Specification?

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  • Emmanuel Carré
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    Abstract

    The New Keynesian Phillips Curve (NKPC) specification in the Euro area is controversial. For some it is purely forward-looking, when others incorporate a backward-looking component into a ‘hybrid’ NKPC (HNKPC). This article contributes to this debate first by drawing stylised facts of the Euro area (H)NKPC from a quantitative review of 88 comparable empirical estimates from 21 articles. If the forward-looking share dominates, a substantial backward-looking fraction is found (about one-third). This result is fairly robust to sub-sample and simple tests. It is also shown that micro evidence from firms’ pricing surveys is favourable to this result. Since the observed variations in estimates could be a limitation to this otherwise clear result, the second contribution of this article is to explore the factors driving these variations. Finally, policy implications are examined.

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    File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/80984/1/2ARTICLE%20CARRE.pdf
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    Bibliographic Info

    Article provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.

    Volume (Year): 53 (2010)
    Issue (Month): 3/4 ()
    Pages: 337-356

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    Handle: RePEc:bxr:bxrceb:2013/80984

    Note: Special Issue "26th Symposium on Money, Banking and Finance" Guest Editors :Sébastien Galanti and Grégory Levieuge
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    Keywords: New Keynesian Phillips Curve; Inflation persistence;

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